Debt

9 Months Ended

Sep. 27, 2020

Long-term debt consisted of the following as of the dates presented (in thousands):


	September 27,		December 31,
	2020		2019
First Term Loan	$	491,867	$	506,772
Second Term Loan	128,783		265,329

Total debt	620,650		772,101
Unamortized discount and debt issuance costs	(13,568)		(22,164)
Total debt, net of discount and debt issuance costs	607,082		749,937
Less current maturities of long-term debt	(23,044)		(22,007)
Total long-term debt, net of current	$	584,038	$	727,930

Credit Agreements

The Company’s borrowing arrangement provides for current borrowings of $491.9 million under a first lien term loan credit agreement, dated October 26, 2016, as amended (the “2016 First Term Loan”), $128.8 million under a second lien term loan credit agreement, dated October 26, 2016, as amended (the “2016 Second Term Loan”), and $150.0 million under a revolving credit facility dated October 26, 2016, as amended (the “2016 Revolving Credit Facility,” and together with the 2016 First Term Loan and the 2016 Second Term Loan, the “2016 Credit Agreements”). Principal and interest are due quarterly on the 2016 First Term Loan and interest only is due quarterly on the 2016 Second Term Loan. The maturity date of the 2016 First Term Loan is October 20, 2022. For the 2016 Second Term Loan the maturity date is October 20, 2023. For the Company’s 2016 Revolving Credit Facility the maturity date is October 20, 2021.

In connection with the Business Combination, Shay was required to amend its 2016 Credit Agreements and reduce its outstanding indebtedness under its credit facilities such that the total indebtedness under the facilities, minus cash on hand at the consummation of the transaction would not be greater than $572.1 million. Immediately after the closing of the Business

Combination the outstanding balance on the 2016 Second Term Loan was reduced by approximately $136.5 million to a principal balance of $128.8 million.

The 2016 Credit Agreements require the Company to comply with specified financial covenants under certain circumstances, including the maintenance of certain leverage ratios.

The 2016 Credit Agreements also contain various non-financial covenants, including affirmative covenants with respect to reporting requirements and maintenance of business activities, and negative covenants that, among other things, may limit or impose restrictions on the Company’s ability to alter the character of the business, consolidate, merge, or sell assets, incur liens or additional indebtedness, make investments, and undertake certain additional actions.

The Company was in compliance with the financial and non-financial covenants under the 2016 Credit Agreements as of September 27, 2020 and December 31, 2019, respectively.

Future principal maturities of the Company’s long-term debt are summarized as follows (in thousands):


	As of
	September 27, 2020
Remainder of 2020	$	14,905
2021	29,810
2022	447,152
2023	128,783
2024	—
Thereafter	—
Total	$	620,650

As of September 27, 2020 and December 31, 2019, the available borrowing capacity under the 2016 Revolving Credit Facility was approximately $105.4 million and $121.8 million, respectively.

Interest Rates on Credit Agreements

The interest rate per annum applicable to amounts borrowed under the 2016 First Term Loan is equal to either the Base Rate (as defined below) or the LIBO Rate (as defined below), in either case, plus (i) 4.5% in the case of the Base Rate loans and (ii) 5.5% in the case of LIBO Rate loans.

The interest rate per annum applicable to amounts borrowed under the 2016 Second Term Loan is equal to either the Base Rate or the LIBO Rate, in either case, plus (i) 8.5% in the case of the Base Rate loans and (ii) 9.5% in the case of LIBO Rate loans.

The “Base Rate” is defined as a fluctuating rate per annum equal to the highest of (a) the Federal Funds Rate plus one half of one percent, (b) the rate of interest in effect for such day as publicly announced from time to time by Bank of America (“BofA”) as its “prime rate,” and (c) the LIBO Rate for a LIBO Rate loan with a one month Interest Period commencing on such day plus

1.0%. The “prime rate” is a rate set by BofA based upon various factors including BofA’s costs and desired return, general economic conditions and other factors, and is used as a reference point for pricing some loans, which may be priced at, above, or below such announced rate. The LIBO Rate is defined as the rate per annum equal to the London Interbank Offered Rate or a comparable or successor rate, whichever rate is approved by the Administrative Agent (as that term is defined in the Credit Agreements).

The interest rate per annum applicable to the 2016 Revolving Credit Facility is equal to either a Base Rate or a LIBO Rate plus (i) a range of 0.8% to 1.3% in the case of Base Rate loans and (ii) a range of 1.8% to 2.3% in the case of LIBO Rate loans, each based on average availability as of the first day of each quarter.

As of September 27, 2020 and December 31, 2019, the applicable interest rate on the amounts borrowed under the 2016 First Term Loan was 6.5% and 7.4%, respectively. As of September 27, 2020 and December 31, 2019, the applicable interest rate on amounts borrowed under the 2016 Second Term Loan was 10.5% and 11.4%, respectively.

As of September 27, 2020 and December 31, 2019, the applicable interest rate on amounts borrowed under the 2016 Revolving Credit Facility was 4.0% and 5.8%, respectively.

In addition, the interest rate on our term loan borrowings and revolving loan borrowings is based on the London Interbank Offered Rate (“LIBOR” or “LIBO Rate”). LIBOR is the subject of recent national, international, and other regulatory guidance and proposals for reform. In July 2017, the Chief Executive of the U.K. Financial Conduct Authority (the “FCA”), which regulates LIBOR, announced that the FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBOR benchmark after 2021. This announcement indicates that the continuation of LIBOR on the current basis cannot and will not be guaranteed after 2021, and it appears likely that LIBOR will be discontinued or modified by 2021. The consequences of the discontinuance of the LIBOR benchmark cannot be entirely predicted but could include an increase in the cost of our variable rate indebtedness.

Letters of Credit

The Company had 13 outstanding letters of credit for program and insurance requirements totaling approximately $23.9 million as of September 27, 2020 and 11 outstanding letters of credit for program and insurance requirements totaling approximately $21.2 million as of December 31, 2019.