11.

DEBT

Total debt consisted of the following (in thousands):

		Interest Rate at
Debt Description	Maturity	December 30, 2017		December 30, 2017			December 31, 2016
ABL Facility	October 20, 2020	4.69	%	$	80,000		$	30,000
2012 ABS Facility	September 21, 2020	2.49			580,000			645,000
Amended and Restated 2016 Term Loan (net of $9,963 and $13,318 of unamortized deferred financing costs)	June 27, 2023	4.07			2,157,037			2,175,682
2016 Senior Notes (net of $6,229 and $7,185 of unamortized deferred financing costs)	June 15, 2024	5.88			593,771			592,815
Obligations under capital leases	2018–2025	2.36 - 6.18			336,603			305,544
Other debt	2018–2031	5.75 - 9.00			9,870			32,672
Total debt					3,757,281			3,781,713
Current portion of long-term debt					(109,226	)		(75,962	)
Long-term debt				$	3,648,055		$	3,705,751

At December 30, 2017, after considering interest rate swaps that fixed the interest rate on $1.1 billion of principal of the Amended and Restated 2016 Term Loan, approximately 54% of the principal amount of the Company’s total debt was at a fixed rate and approximately 46% was at a floating rate.

Principal payments to be made on outstanding debt as of December 30, 2017, were as follows (in thousands):

	2018	$	109,226
	2019		89,201
	2020		743,061
	2021		71,841
	2022		56,960
Thereafter			2,703,184
		$	3,773,473

Following is a description of each of the Company’s debt instruments outstanding as of December 30, 2017:

Revolving Credit Agreement—The Amended and Restated ABL Credit Agreement, dated October 20, 2015, as amended, is USF’s asset backed senior secured revolving loan facility (the “ABL Facility”) and provides for loans under its two tranches: ABL Tranche A-1 and ABL Tranche A, with its capacity limited by a borrowing base. The maximum borrowing available is $1,300 million, with ABL Tranche A-1 at $100 million, and ABL Tranche A at $1,200 million.

As of December 30, 2017, USF had $80 million of outstanding borrowings, and had issued letters of credit totaling $412 million under the ABL Facility. Outstanding letters of credit included: (1) $81 million issued to secure USF’s obligations with respect to certain facility leases, (2) $328 million issued in favor of certain commercial insurers securing USF’s obligations with respect to its self-insurance program, and (3) $3 million in letters of credit for other obligations. There was available capacity on the ABL Facility of $807 million at December 30, 2017. As of December 30, 2017, on Tranche A-1 borrowings, USF can periodically elect to pay interest at an alternative base rate (“ABR”), as defined in the ABL Facility, plus 1.50% or the London Inter Bank Offered Rate (“LIBOR”) plus 2.50%. On Tranche A borrowings, USF can periodically elect to pay interest at ABR plus 0.25% or LIBOR plus 1.25%. For both tranches, the interest rate spreads are the lowest provided for in the agreement, based upon USF’s consolidated secured leverage ratio (as defined in the agreement). The ABL Facility also carries letter of credit fees of 1.25% and an unused commitment fee of 0.25%. The weighted-average interest rate on outstanding borrowings for the ABL Facility was 4.29% and 2.65% for fiscal year 2017 and 2016, respectively.

Accounts Receivable Financing Program—Under the 2012 ABS Facility, USF sells, on a revolving basis, its eligible receivables to the Receivables Company. See Note 6, Accounts Receivable Financing Program.

On September 20, 2017, the 2012 ABS Facility was amended to extend the maturity date from September 30, 2018 to September 21, 2020. There were no other significant changes to the 2012 ABS Facility. The Company incurred $1 million of lender fees and third-party costs related to the amendment, which were capitalized as deferred financing costs and will be amortized to the September 2020 maturity date.

The maximum capacity under the 2012 ABS Facility is $800 million. Borrowings under the 2012 ABS Facility were $580 million at December 30, 2017. The Company, at its option, can request additional borrowings up to the maximum commitment, provided sufficient eligible receivables are available as collateral. There was available capacity on the 2012 ABS Facility of $115 million at December 30, 2017 based on eligible receivables as collateral. The 2012 ABS Facility bears interest at LIBOR plus 1.00%, and carries an unused commitment fee of 0.35%. The weighted-average interest rate on outstanding borrowings for the 2012 ABS Facility was 2.18% and 1.69% for fiscal year 2017 and 2016, respectively.

Amended and Restated 2016 Term Loan Agreement—The Amended and Restated 2016 Term Loan Credit Agreement, dated June 27, 2016, as amended (the “Amended and Restated 2016 Term Loan”), consists of a senior secured term loan with a carrying value of $2,157 million at December 30, 2017, net of $10 million of unamortized deferred financing costs. Principal repayments of $5.5 million are payable quarterly with the balance due at maturity. The debt may require mandatory repayments if certain assets are sold, as defined in the agreement.

The Amended and Restated 2016 Term Loan was amended on February 17, 2017 (the “February 2017 Amendment”) and November 30, 2017 (the “November 2017 Amendment”), in each case and among other things, to reduce the interest rate spread on outstanding borrowings. The February 2017 Amendment reduced the interest rate spread on outstanding borrowings by 25 basis points to a fixed rate of ABR plus 1.75% or LIBOR plus 2.75%, with a LIBOR floor of 0.75%, based on USF’s periodic election. The November 2017 Amendment further reduced the interest rate spread on outstanding borrowings an additional 25 basis points to either ABR plus 1.50% or LIBOR plus 2.50%, based on USF’s periodic election, and reduced the LIBOR floor from 0.75% to zero. The interest rate spread on both ABR and LIBOR borrowings can be further reduced 25 basis points to either ABR plus 1.25% or LIBOR plus 2.25%, if USF’s consolidated secured leverage ratio (as defined in the Amended and Restated 2016 Term Loan) is equal to or less than 1.75:1.00 at the end of the most recent fiscal quarter. At December 30, 2017, USF’s consolidated secured leverage ratio exceeded 1.75:1.00.

The Company determined that the terms of both the February 2017 Amendment and the November 2017 Amendment were not substantially different from the previous terms of the Amended and Restated 2016 Term Loan, for substantially all continuing lenders and, accordingly, debt modification accounting was applied. We applied debt extinguishment accounting to the lenders that either exited the term loan facility, or had terms that were substantially different from their original loan agreements.

The Company recorded an aggregate of $0.5 million of third-party costs, and write-offs of $1.4 million of unamortized deferred financing costs, related to the February 2017 Amendment and the November 2017 Amendment, in interest expense. Unamortized deferred financing costs of $10 million at November 30, 2017 were carried forward and will be amortized through June 27, 2023, the maturity date of the Amended and Restated 2016 Term Loan.

As described in Note 10, Fair Value Measurements, USF entered into four-year interest rate swaps with a notional amount of $1.1 billion, reducing to $825 million in the fourth year, effectively converting approximately half of the principal amount of the Amended and Restated 2016 Term Loan from a variable to a fixed rate loan. On November 30, 2017, the interest rate swaps were amended in conjunction with the November 2017 Amendment, reducing the rate on the portion of the principal amount of the Amended and Restated 2016 Term Loan subject to hedging agreements to 4.21%.

2016 Senior Notes—The 2016 Senior Notes due 2024, with a carrying value of $594 million at December 30, 2017, net of $6 million of unamortized deferred financing costs, bear interest at 5.875%. On or after June 15, 2019, this debt is redeemable, at USF’s option, in whole or in part at a price of 102.938% of the remaining principal, plus accrued and unpaid interest, if any, to the redemption date. On June 15, 2020 and June 15, 2021, the optional redemption price for the debt declines to 101.469% and 100.0%, respectively, of the remaining principal amount, plus accrued and unpaid interest, if any, to the redemption date. Prior to June 15, 2019, up to 40% of the debt may be redeemed with the aggregate proceeds from equity offerings, as defined in the June 27, 2016 Indenture, as supplemented, at a redemption premium of 105.875%.

Other Debt–Obligations under capital leases of $337 million at December 30, 2017, consist of amounts due for transportation equipment and building leases. Other debt of $10 million at December 30, 2017 consists primarily of various state industrial revenue bonds.

2016 Debt Transactions and Loss on Extinguishment

IPO Proceeds

As discussed in Note 1, Overview and Basis of Presentation, in June 2016, US Foods completed its IPO. Net proceeds of $1,114 million were used to redeem $1,090 million in principal of USF’s Old Senior Notes and pay the related $23 million early redemption premium. The balance of the Old Senior Notes was redeemed with proceeds from the June 2016 refinancings further discussed below.

June 2016 Refinancings

In June 2016, USF entered into a series of transactions to refinance the $2,042 million principal of its term loan, redeem the remaining $258 million principal of its Old Senior Notes and pay the related $6 million early redemption premium. The aggregate principal amount outstanding of the Amended and Restated 2016 Term Loan was increased to $2,200 million. Additionally, USF issued $600 million in principal amount of 2016 Senior Notes.

The debt redemption and refinancing transactions completed in June 2016 resulted in a loss on extinguishment of debt of $42 million, consisting of a $29 million early redemption premium related to the Old Senior Notes, $7 million of lender and third-party fees, and a $6 million write-off of certain pre-existing unamortized deferred financing costs and premiums related to the refinanced and redeemed facilities.

CMBS Fixed Facility Defeasance

On September 23, 2016, USF, through a wholly owned subsidiary, legally defeased the commercial mortgage backed securities facility (the “CMBS Fixed Facility”), scheduled to mature on August 1, 2017. The CMBS Fixed Facility had an outstanding balance of $471 million net of unamortized deferred financing costs of $1 million. The cash outlay for the defeasance of $485 million represented the purchase price of U.S. government securities that would generate sufficient cash flow to fund interest payments from the effective date of the defeasance through, and including the repayment of, the $472 million principal for the CMBS Fixed Facility on February 1, 2017, the earliest date the loan could be prepaid. The defeasance resulted in a loss on extinguishment of debt of approximately $12 million, consisting of the difference between the purchase price of the U.S. government securities, not attributable to accrued interest through the effective date of the defeasance, and the outstanding principal of the CMBS Fixed Facility, and other costs of $1 million, consisting of unamortized deferred financing costs and other third-party costs.

Security Interests

Substantially all of the Company’s assets are pledged under the various debt agreements. Debt under the 2012 ABS Facility is secured by certain designated receivables and, in certain circumstances, by restricted cash. The ABL Facility is secured by certain other designated receivables not pledged under the 2012 ABS Facility, as well as inventory and tractors and trailers owned by the Company. Additionally, the lenders under the ABL Facility have a second priority interest in the assets pledged under the Amended and Restated 2016 Term Loan. USF’s obligations under the Amended and Restated 2016 Term Loan are secured by all of the capital stock of USF and its direct and indirect wholly owned domestic subsidiaries, as defined in the agreements, and substantially all non-real estate assets of USF and its subsidiaries not pledged under the 2012 ABS Facility or the ABL Facility. Additionally, the lenders under the Amended and Restated 2016 Term Loan have a second priority interest in the inventory and tractors and trailers pledged under the ABL Facility. USF’s interest rate swap obligations are secured by the collateral securing the ABL Facility. Pursuant to the terms of the interest rate swap agreement between each of the interest rate swap counterparties and USF, each of the interest rate swap counterparties has agreed that its right to receive payment from the sale of the collateral is subordinate to the rights of the lenders under the ABL Facility. USF is not required to provide additional collateral to its hedge counterparties.

Restrictive Covenants

The credit facilities, loan agreements and indentures contain customary covenants. These include, among other things, covenants that restrict USF’s ability to incur certain additional indebtedness, create or permit liens on assets, pay dividends, or engage in mergers or consolidations. As of December 30, 2017, USF had $751 million of restricted payment capacity under these covenants, and approximately $2,001 million of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation.

Certain debt agreements also contain customary events of default. Those include, without limitation, the failure to pay interest or principal when it is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true when made, and certain insolvency events. If a default event occurs and continues, the principal amounts outstanding, together with all accrued unpaid interest and other amounts owed, may be declared immediately due and payable by the lenders. Were such an event to occur, the Company would be forced to seek new financing that may not be on as favorable terms as its current facilities. The Company’s ability to refinance its indebtedness on favorable terms, or at all, is directly affected by the current economic and financial conditions. In addition, the Company’s ability to incur secured indebtedness (which may enable it to achieve more favorable terms than the incurrence of unsecured indebtedness) depends in part on the value of its assets. This, in turn, relies on the strength of its cash flows, results of operations, economic and market conditions, and other factors.