DEBT

Total debt consisted of the following:



Debt Description	Maturity	Interest Rate at December 29, 2018	December 29, 2018			December 30, 2017
ABL Facility	October 20, 2020	7.00%	$	81		$	80
ABS Facility	September 21, 2020	3.52%	275			580
Term Loan Facility (net of $6 and $10 of unamortized deferred financing costs)	June 27, 2023	4.34%	2,145			2,157
Senior Notes (net of $5 and $6 of unamortized deferred financing costs)	June 15, 2024	5.88%	595			594
Obligations under capital leases	2019–2025	2.31% - 6.19%	352			336
Other debt	2021–2031	5.75% - 9.00%	9			10
Total debt			3,457			3,757
Current portion of long-term debt			(106		)	(109		)
Long-term debt			$	3,351		$	3,648

At December 29, 2018, after considering interest rate swaps that fixed the interest rate on $1.1 billion of principal of the Term Loan Facility, as described in Note 11, Fair Value Measurements, approximately 41% of the Company’s total debt was at a floating rate.

Principal payments to be made on outstanding debt, exclusive of deferred financing costs, as of December 29, 2018, were as follows:



2019	$	106
2020	455
2021	87
2022	72
2023	2,103
Thereafter	645
	$	3,468

The following is a description of each of the Company’s debt instruments outstanding as of December 29, 2018:

ABL Facility—The Amended and Restated ABL Credit Agreement, dated as of October 20, 2015, as further amended, sets forth 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 29, 2018, USF had $81 million of outstanding borrowings, and had issued letters of credit totaling $372 million, under the ABL Facility. Outstanding letters of credit included: (1) $298 million issued in favor of certain commercial insurers securing USF’s obligations with respect to its self-insurance program, (2) $73 million issued to secure USF’s obligations with respect to certain real estate leases, and (3) $1 million issued for other obligations. There was available capacity on the ABL Facility of $847 million at December 29, 2018. As of December 29, 2018, on Tranche A-1 borrowings, USF may periodically elect to pay interest at an alternative base rate (“ABR”), as defined in the ABL Facility, plus 1.50% or the London Interbank 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%. 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 5.12% and 4.29% for fiscal years 2018 and 2017, respectively.

ABS Facility—Under the ABS Facility, USF sells, on a revolving basis, its eligible receivables to the Receivables Company. See Note 7, Accounts Receivable Financing Program.

The maximum capacity under the ABS Facility is $800 million. Borrowings under the ABS Facility were $275 million at December 29, 2018. 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 ABS Facility of $455 million at December 29, 2018 based on receivables eligible as collateral. The 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 ABS Facility was 3.00% and 2.18% for fiscal years 2018 and 2017, respectively.

Term Loan Facility—The Credit Agreement, dated as of May 11, 2011, as amended, provides USF with a senior secured term loan facility (the “Term Loan Facility”) with an outstanding balance of $2.1 billion at December 29, 2018. 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 set forth in the agreement.

On June 22, 2018, the Term Loan Facility was further amended to lower the interest rate margins under the Term Loan Facility to 2.00% for LIBOR borrowings and 1.00% for ABR borrowings, among other things. The table above reflects the December 29, 2018 interest rate on the unhedged portion of the Term Loan Facility. With respect to the portion of the Term Loan Facility subject to interest rate hedging agreements ($1.1 billion as of December 29, 2018), the June 22, 2018 amendment reduced the effective interest rate to 3.71%.

In connection with the June 22, 2018 amendment of the Term Loan Facility, under accounting guidance, the Company applied modification accounting to the majority of the continuing lenders as the terms were not substantially different from the terms that applied to those lenders prior to the amendment. For the remaining lenders, the Company applied debt extinguishment accounting. The Company recorded a debt extinguishment loss of $3 million in interest expense, consisting primarily of a write-off of unamortized deferred financing costs related to the June 22, 2018 amendment. Unamortized deferred financing costs of $7 million at June 30, 2018 were carried forward and will be amortized through June 27, 2023, the maturity date of the Term Loan Facility.

The Term Loan Facility was also amended on February 17, 2017 and November 30, 2017 (the “2017 Amendments”), in each case to reduce the interest rate spread on outstanding borrowings, among other things.

In connection with the 2017 Amendments of the Term Loan Facility, under accounting guidance, the Company applied modification accounting to the majority of the continuing lenders as the terms were not substantially different from the terms that applied to those lenders prior to the amendment. For the remaining lenders, the Company applied debt extinguishment accounting. The Company recorded a debt extinguishment loss of $2 million in interest expense, consisting primarily of write-offs of unamortized deferred financing costs related to the 2017 Amendments.

Senior Notes—The Senior Notes due 2024, with a carrying value of $595 million at December 29, 2018, net of $5 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 Senior Notes indenture, as supplemented, at a redemption premium of 105.875%.

Capital Leases–Obligations under capital leases of $352 million at December 29, 2018 consist of amounts due for transportation equipment and building leases.

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 Facility, 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 Term Loan Facility was increased to $2,200 million. Additionally, USF issued $600 million in principal amount of 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 agreements governing our indebtedness. Debt under the 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 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 Term Loan Facility. USF’s obligations under the Term Loan Facility 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 ABS Facility or the ABL Facility. Additionally, the lenders under the Term Loan Facility 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

USF's 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 29, 2018, USF had $991 million of restricted payment capacity under these covenants, and approximately $2,238 million of its net assets were restricted after taking into consideration the net deferred tax assets and intercompany balances that eliminate in consolidation.

Certain agreements governing our indebtedness 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 an event of default occurs and remains uncured, 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, is dependent on the strength of its cash flows, results of operations, economic and market conditions, and other factors.