LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS

12 Months Ended

Feb. 26, 2022

Debt Disclosure [Abstract]

LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS

LONG-TERM DEBT AND FINANCE LEASE OBLIGATIONS

The Company's long-term debt as of February 26, 2022 and February 27, 2021, net of debt discounts of $41.4 million and $44.8 million, respectively, and deferred financing costs of $57.5 million and $69.8 million, respectively, consisted of the following (in millions):

	February 26, 2022		February 27, 2021
Senior Unsecured Notes due 2023 to 2030, interest rate range of 3.25% to 7.50%	$	6,492.5	$	6,680.5
Safeway Inc. Notes due 2027 to 2031, interest rate range of 7.25% to 7.45%	374.4		504.3
New Albertsons L.P. Notes due 2026 to 2031, interest rate range of 6.52% to 8.70%	472.6		469.1
Other financing obligations	29.1		29.4
Mortgage notes payable, secured	17.1		17.6
Finance lease obligations (see Note 8)	579.4		612.7
Total debt	7,965.1		8,313.6
Less current maturities	(828.8)		(212.4)
Long-term portion	$	7,136.3	$	8,101.2

As of February 26, 2022, the future maturities of long-term debt, excluding finance lease obligations, debt discounts and deferred financing costs, consisted of the following (in millions):

2022	$	750.8
2023	0.9
2024	16.9
2025	14.1
2026	2,760.1
Thereafter	3,941.8
Total	$	7,484.6

The Company's asset-based loan ("ABL") facility (the "ABL Facility") and certain of the outstanding notes and debentures have, restrictive covenants, subject to the right to cure in certain circumstances, calling for the acceleration of payments due in the event of a breach of a covenant or a default in the payment of a specified amount of indebtedness due under certain debt arrangements. There are no restrictions on the Company's ability to receive distributions from its subsidiaries to fund interest and principal payments due under the ABL Facility and the Company's senior unsecured notes (the "Senior Unsecured Notes"). Each of the ABL Facility and the Senior Unsecured Notes restrict the ability of the Company to pay dividends and distribute property to the Company's stockholders. As a result, all of the Company's consolidated net assets are effectively restricted with respect to their ability to be transferred to the Company's stockholders. Notwithstanding the foregoing, the ABL Facility and the

Senior Unsecured Notes each contain customary exceptions for certain dividends and distributions, including the ability to make cumulative distributions under the Senior Unsecured Notes of up to the greater of $1.0 billion or 4.0% of the Company's total assets (which is measured at the time of such distribution) and the ability to make distributions if certain payment conditions are satisfied under the ABL Facility. The Company was in compliance with all such covenants and provisions as of and for the fiscal year ended February 26, 2022.

ABL Facility

At both February 26, 2022 and February 27, 2021, there were no borrowings outstanding under the Company's ABL Facility, and letters of credit issued under the LOC sub-facility were $249.4 million and $354.6 million, respectively. On December 20, 2021, the Company's existing ABL Facility, which provides for a $4,000.0 million senior secured revolving credit facility, was amended and restated to, among other things, extend the maturity date of the facility to December 20, 2026 and reduce the unused fee to 0.25%. The new ABL Facility has an interest rate of LIBOR plus a margin ranging from 1.25% to 1.50% and also provides for a letters of credit ("LOC") sub-facility of $1,500.0 million. As part of the amendment, the Company capitalized $11.0 million of deferred financing costs, recorded within Other assets in the Consolidated Balance Sheets, and wrote-off $3.5 million of unamortized deferred financing costs to interest expense in the Consolidated Statements of Operations and Comprehensive Income.

On March 12, 2020, the Company provided notice to the lenders to borrow $2,000.0 million under the Company's ABL Facility as a precautionary measure in order to increase its cash position and preserve flexibility in light of the uncertainty in the global markets resulting from the COVID-19 pandemic. The Company repaid the $2,000.0 million in full on June 19, 2020.

The ABL Facility is guaranteed by the Company's existing and future direct and indirect wholly owned domestic subsidiaries that are not borrowers, subject to certain exceptions. The ABL Facility is secured by, subject to certain exceptions, (i) a first-priority lien on substantially all of the ABL Facility priority collateral and (ii) a first-priority lien on substantially all other assets (other than real property). The ABL Facility contains no financial covenant unless and until (a) excess availability is less than (i) 10.0% of the lesser of the aggregate commitments and the then-current borrowing base at any time or is (ii) $250.0 million at any time or (b) an event of default is continuing. If any of such events occur, the Company must maintain a fixed charge coverage ratio of 1.0 to 1.0 from the date such triggering event occurs until such event of default is cured or waived and/or the 30th day that all such triggers under clause (a) no longer exist.

Senior Unsecured Notes

Fiscal 2019

On August 15, 2019, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million in aggregate principal amount of 5.875% senior unsecured notes due February 15, 2028 (the "2028 Notes"). Interest on the 2028 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on February 15, 2020. Proceeds from the 2028 Notes were used to partially fund the fiscal 2019 term loan repayment (see Albertsons Term Loans below).

On November 22, 2019, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million in aggregate principal amount of 4.625% senior unsecured notes due January 15, 2027 (the "2027 Notes"). Interest on the 2027 Notes is payable semi-annually in arrears on January 15 and July 15 of each year, commencing on July 15, 2020. Proceeds from the 2027 Notes were used to partially fund the fiscal 2019 term loan repayment (see Albertsons Term Loans below).

On February 5, 2020, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million in aggregate principal amount of new 3.50% senior unsecured notes due February 15, 2023 (the "2023 Notes"), $600.0 million in aggregate principal amount of additional 2027 Notes (the "Additional 2027 Notes") and $1,000.0 million in aggregate principal amount of new 4.875% senior unsecured notes due February 15, 2030 (the "2030 Notes" and together with the 2023 Notes and Additional 2027 Notes, the "February Notes"). The Additional 2027 Notes were issued as "additional securities" under the indenture governing the outstanding 2027 Notes. The Additional 2027 Notes are expected to be treated as a single class with the outstanding 2027 Notes for all purposes and have the same terms as those of the outstanding 2027 Notes. Interest on the 2023 Notes and 2030 Notes is payable semi-annually in arrears on February 15 and August 15 of each year, commencing on August 15, 2020. The proceeds received from the issuance of the February Notes, together with approximately $18 million of cash on hand, were used to (i) to partially fund the fiscal 2019 term loan repayment (see Albertsons Term Loans below) and (ii) pay fees and expenses related to the fiscal 2019 term loan repayment and the issuance of the February Notes.

Fiscal 2020

On August 31, 2020, the Company and substantially all of its subsidiaries completed the issuance of $750.0 million in aggregate principal amount of 3.250% senior unsecured notes due March 15, 2026 (the "New 2026 Notes") and $750.0 million in aggregate principal amount of 3.500% senior unsecured notes due March 15, 2029 (the "2029 Notes" and together with the New 2026 Notes, the "August Notes"). Interest on the August Notes is payable semi-annually in arrears on March 15 and September 15 of each year, commencing on March 15, 2021. On September 11, 2020, a portion of the proceeds from the issuance of the August Notes, together with approximately $60 million of cash on hand, were used to fund the full redemption of the $1,250.0 million aggregate principal amount outstanding of the Company's 6.625% senior unsecured notes due 2024 (the "2024 Redemption"). In connection with the 2024 Redemption, the Company paid an associated redemption premium of $41.4 million. The Company recorded a $49.1 million loss on debt extinguishment related to the 2024 Redemption, comprised of the $41.4 million redemption premium and $7.7 million write-off of deferred financings costs.

On September 16, 2020, remaining proceeds from the issuance of the August Notes were used to fund the partial redemption of $250.0 million of the $1,250.0 million in aggregate principal amount outstanding (the "September Partial 2025 Redemption") of the Company's 5.750% senior unsecured notes due September 2025 (the "2025 Notes"). In connection with the September Partial 2025 Redemption, the Company paid an associated redemption premium of $7.2 million. The Company recorded an $8.6 million loss on debt extinguishment related to the September Partial 2025 Redemption, comprised of the $7.2 million redemption premium and a $1.4 million write-off of deferred financing costs.

On December 22, 2020, the Company and substantially all of its subsidiaries completed the issuance of $600.0 million in aggregate principal amount of additional 2029 Notes (the "Additional 2029 Notes"). The Additional 2029 Notes were issued as "additional securities" under the indenture governing the outstanding 2029 Notes. The Additional 2029 Notes are expected to be treated as a single class with the outstanding 2029 Notes for all purposes and have the same terms as those of the outstanding 2029 Notes. On January 4, 2021, proceeds from the issuance of the Additional 2029 Notes, together with approximately $230 million of cash on hand, were used to fund a partial redemption of $800.0 million of the $1,000.0 million in aggregate principal amount outstanding of the 2025 Notes (the "January Partial 2025 Redemption"). In connection with the January Partial 2025 Redemption, the Company paid an associated redemption premium of $23.0 million. The Company recorded a $27.6 million loss on debt extinguishment related to the January Partial 2025 Redemption, comprised of the $23.0 million redemption premium and a $4.6 million write-off of deferred financing costs.

Fiscal 2021

On November 1, 2021, the Company redeemed the remaining $200.0 million aggregate principal amount outstanding of its 2025 Notes (the "2025 Redemption"), which were redeemed using cash on hand, at a redemption price of 101.438% of the principal amount thereof plus accrued and unpaid interest. The Company recorded a $3.7 million loss on debt extinguishment related to the 2025 Redemption, comprised of a $2.9 million redemption premium and a $0.8 million write-off of deferred financing costs.

The 2023 Notes, the $600.0 million in aggregate principal amount of 7.5% senior unsecured notes due March 15, 2026 (the "2026 Notes"), the New 2026 Notes, the 2027 Notes, the Additional 2027 Notes, the 2028 Notes, the 2029 Notes, the Additional 2029 Notes and the 2030 Notes have not been and will not be registered with the SEC. Each of these notes are also fully and unconditionally guaranteed, jointly and severally, by substantially all of the Company’s subsidiaries that are not issuers under the indenture governing such notes.

The Company, an issuer and direct or indirect parent of each of the other issuers of the 2023 Notes, the 2026 Notes, the New 2026 Notes, the 2027 Notes, the Additional 2027 Notes, the 2028 Notes, the 2029 Notes, the Additional 2029 Notes and the 2030 Notes, has no independent assets or operations. All of the direct or indirect subsidiaries of the Company, other than subsidiaries that are issuers, or guarantors, as applicable, of the 2023 Notes, the 2026 Notes, the New 2026 Notes, the 2027 Notes, the Additional 2027 Notes, the 2028 Notes, the 2029 Notes, the Additional 2029 Notes and the 2030 Notes are minor, individually and in the aggregate.

Safeway Notes

On May 24, 2019, the Company completed a cash tender offer and early redemption of Safeway notes with a par value of $34.1 million and a book value of $33.3 million for $32.6 million, plus accrued and unpaid interest of $0.7 million (the "Safeway Tender"). Including related fees, the Company recognized a loss on debt extinguishment related to the Safeway Tender of $0.5 million.

The Company repaid the remaining $136.8 million in aggregate principal amount of Safeway's 3.95% Notes due 2020 on their maturity date, August 15, 2020. The Company also repaid the remaining $130.0 million in aggregate principal amount of Safeway's 4.75% Notes due 2021 on their maturity date, December 1, 2021.

NALP Notes

On May 24, 2019, the Company completed a cash tender offer and early redemption of New Albertsons L.P.'s ("NALP") Notes with a par value of $402.9 million and a book value of $363.7 million for $382.7 million, plus accrued and unpaid interest of $8.2 million (the "NALP Notes Tender"). Including related fees, the Company recognized a loss on debt extinguishment related to the NALP Notes Tender of $19.1 million.

Also during fiscal 2019, the Company repurchased NALP Notes on the open market with an aggregate par value of $553.9 million and a book value of $502.0 million for $547.5 million plus accrued and unpaid interest of $11.3 million (the "NALP Notes Repurchase"). Including related fees, the Company recognized a loss on debt extinguishment related to the NALP Notes Repurchase of $46.2 million.

Albertsons Term Loans

Through a series of repayments and refinancing transactions during fiscal 2019, the Company repaid $4,662.9 million of aggregate principal amount under its term loan facilities, which effectively represented the full repayment of the entire outstanding term loan balance, along with accrued and unpaid interest and fees and expenses. In connection with these repayments and refinancing transactions, the Company used approximately $864 million of cash on hand and proceeds from the issuance of the 2027 Notes, the 2028 Notes and the February Notes. In connection with the repayments and refinancing transactions, the Company wrote-off $15.2 million of deferred financing costs and $29.9 million of original issue discount which was included as a component in Loss on debt extinguishment, and expensed $20.6 million of deferred financing costs and $27.6 million of original issue discount which was included as a component of Interest expense, net.

Deferred Financing Costs and Interest Expense, Net

Financing costs incurred to obtain all financing, except for ABL Facility financing, are recognized as a direct reduction from the carrying amount of the debt liability and are amortized over the term of the related debt using the effective interest method. Financing costs incurred to obtain ABL Facility financing are capitalized and amortized over the ABL Facility term using the straight-line method. Deferred financing costs associated with ABL Facility financing are included in Other assets and were $25.0 million and $25.9 million as of February 26, 2022 and February 27, 2021, respectively.

Interest expense, net consisted of the following (in millions):

	Fiscal  2021		Fiscal  2020		Fiscal  2019
ABL Facility, senior secured and unsecured notes, term loans and debentures	$	400.0	$	463.4	$	565.3
Finance lease obligations	61.6		70.5		79.8
Amortization of deferred financing costs (1)	23.4		20.9		39.8
Amortization of debt (premiums) discounts, net	(0.2)		(0.6)		34.1
Other interest income	(2.9)		(16.0)		(21.0)
Interest expense, net	$	481.9	$	538.2	$	698.0

(1) Fiscal 2021 amortization of deferred financing costs includes $3.5 million of deferred financing costs expensed in connection with the ABL amendment. Fiscal 2019 amortization of deferred financing costs included $20.6 million of deferred financing costs expensed in connection with the term loan amendment and repayments.