Subsequent Events

3 Months Ended

Mar. 28, 2020

Subsequent Events [Abstract]

Subsequent Events

SUBSEQUENT EVENTS

Smart Foodservice Acquisition—On April 24, 2020, USF completed the acquisition of Smart Stores Holding Corp., a Delaware corporation (“Smart Foodservice”), from funds managed by affiliates of Apollo Global Management, Inc. for $970 million in cash, on a cash-free, debt-free basis, subject to customary post-closing adjustments. Smart Foodservice operates 70 small-format cash and carry stores across California, Washington, Oregon, Idaho, Nevada, Utah and Montana that serve small and mid-sized restaurants and other food business customers. The acquisition of Smart Foodservice expands the Company’s cash and carry business in the West and Northwest parts of the U.S.

USF financed the acquisition with borrowings under a $700 million senior secured term loan facility, as further discussed below, and with cash on hand. The assets, liabilities and results of operations of Smart Foodservice will be included in the Company’s consolidated financial statements beginning on the date the acquisition was completed.

The Company is in the process of gathering the relevant information needed to complete the preliminary estimates of the fair value of assets acquired and liabilities assumed. As a result, the preliminary purchase price allocation for the acquisition has not been completed. The preliminary purchase price allocation and the related unaudited pro forma information will be included in the Company's Quarterly Report for the fiscal second quarter of 2020.

Senior Secured Term Loan Facility—On April 24, 2020, USF entered into a new $700 million senior secured term loan facility (the “2020 Term Loan Facility”) and used the proceeds to fund, in part, the Smart Foodservice acquisition. On April 28, 2020, USF repaid $400 million of the term loan principal with proceeds from the senior secured notes offering further discussed below. The 2020 Term Loan Facility will mature on April 24, 2025. Borrowings under the 2020 Term Loan Facility will bear interest at a rate per annum equal to, at USF’s option, either LIBOR plus a margin of 3.25% (subject to a LIBOR “floor” of 1.00%), or an alternative base rate plus a margin of 2.25%. The interest rate margins on the 2020 Term Loan Facility will increase by 0.50% on April 28, 2021, April 28, 2022, April 28, 2023 and April 28, 2024, respectively.

Senior Secured Notes Offering—On April 28, 2020, USF completed a private offering of $1.0 billion aggregate principal amount of its 6.25% senior secured notes due 2025 (the “Secured Notes”). The initial offering price to investors was 100% of the principal amount thereof. USF used the net proceeds of the Secured Notes to repay $400 million of the 2020 Term Loan Facility borrowed to fund the Smart Foodservice acquisition and the balance of the net proceeds will be used for general corporate purposes.

Convertible Preferred Equity Financing—On April 21, 2020, the Company entered into an Investment Agreement with KKR Fresh Aggregator L.P., a Delaware limited partnership (“KKR”), relating to the issuance and sale to KKR of 500,000 shares of the Company’s Series A Convertible Preferred Stock, par value $0.01 per share (the “Series A Preferred Stock”), for an aggregate purchase price of $500 million, or $1,000 per share. The Series A Preferred Stock will have a liquidation preference of $1,000 per share. Holders of the Series A Preferred Stock will be entitled to a cumulative dividend at the rate of 7.0% per annum, payable quarterly in arrears, as set forth in the Certificate of Designations designating the Series A Preferred Stock. If the Company does not declare and pay a dividend on the Series A Preferred Stock, the dividend rate will increase by 3.0% to 10.0% per annum until all accrued but unpaid dividends have been paid in full. Dividends will be payable in kind through the issuance and sale of additional shares of Series A Preferred Stock for the first four dividend payments following the Series A Preferred Stock Issuance, and thereafter, in cash or in kind, or a combination of both, at the option of the Company. The closing of the issuance and sale of the Series A Preferred Stock is conditioned upon certain customary closing conditions and is expected to occur in May 2020.

ABS Facility—On May 1, 2020, USF repaid in full all $542 million principal amount of borrowings then outstanding under the ABS Facility using cash on hand and subsequently terminated the ABS Facility.

ABL Facility— On May 4, 2020, USF entered into an amendment to the credit agreement governing the ABL Facility. Pursuant to this amendment, the total aggregate amount of commitments under the ABL Facility was increased from $1,600 million to $1,990 million. Following the termination of the ABS Facility, USF transitioned the accounts receivable that secured the ABS Facility to the collateral pool that secures the ABL Facility. We expect this transition to increase the size of our borrowing base under the ABL Facility.