Debt

12 Months Ended

Dec. 31, 2020

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


	December 31,		December 31,
	2020		2019
First Term Loan	$	890,000	$	506,772
Second Term Loan	—		265,329

2020 ABL Credit Agreement	—		—
Total debt	890,000		772,101
Unamortized discount and debt issuance costs	(23,733)		(22,164)
Total debt, net of discount and debt issuance costs	866,267		749,937
Less current maturities of long-term debt	(5,961)		(22,007)
Total long-term debt, net of current	$	860,306	$	727,930

Credit Agreements

On October 19, 2020, the Company refinanced the 2016 Credit Agreements and entered into new senior secured credit facilities (the “2020 Credit Agreements”). The Company’s new borrowing arrangement provides for borrowings up to $890.0 million. The 2020 Credit Agreements established a $740.0 million term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5%, a $150.0 million delayed draw term loan facility maturing in October 2027 priced at LIBOR plus a spread of 4.5% (together the “First Term Loan”), and a $175.0 million senior secured revolving credit facility (“the 2020 ABL Credit Agreement”) maturing in October 2025 priced at LIBOR plus a spread of 1.8% to 2.3%.

Proceeds from the debt refinance were used to pay-off the preexisting 2016 Credit Agreements first and second lien in the amount of $484.4 million and $128.8 million, respectively, with the remaining amounts to be used for general corporate purposes, mergers and acquisitions, and transaction fees and expenses. The 2016 Credit Agreements had $13.2 million in unamortized deferred financing costs and discounts on the balance sheet. The Company recognized $12.5 million as loss on extinguishment of debt in interest expense on the Consolidated Statement of Operations as the difference between the net carrying value of the extinguished debt and reacqusition price of the refinance debt.

The loans under the 2020 Credit Agreements are secured by a first lien over substantially all of the Company's assets as well as affirmative and negative covenants customary for transactions of this type, including limitations with respect to indebtedness, liens, investments, dividends, disposition of assets, change in business and transactions with affiliates.

The 2020 Credit Agreements require the Company to comply with specified financial covenants under certain circumstances, including the maintenance of certain leverage ratios.

The 2020 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.

PAE was in compliance with the financial covenants under the 2020 Credit Agreements as of December 31, 2020.

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


	As of
	December 31, 2020
2021	$	8,900
2022	8,900
2023	8,900
2024	8,900
2025	8,900
Thereafter	845,500
Total	$	890,000

As of December 31, 2020 and December 31, 2019, the available borrowing capacity under the 2020 ABL Credit Agreement was approximately $132.8 million and $121.8 million, respectively.

Interest Rates on Credit Agreements

The interest rate per annum applicable to amounts borrowed under the 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) 3.5% 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 Term 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. 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 2020 Credit Agreements).

As of December 31, 2020 and December 31, 2019, the applicable interest rate on the amounts borrowed under the First Term Loan was 5.3% and 7.4%, respectively. As of December 31, 2020 and December 31, 2019, the applicable interest rate on amounts borrowed under the Second Term Loan was not applicable and 11.4%, respectively.

The interest rate per annum applicable to the 2020 Credit Agreement 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 December 31, 2020 and December 31, 2019, the applicable interest rate on amounts borrowed under the 2020 Revolving Credit Facility was 4.0% and 5.8%, respectively.

In addition, the LIBO Rate is the subject of recent national, international, and other regulatory guidance and proposals for reform and replacement. In July 2017, the Chief Executive of the U.K. Financial Conduct Authority (the “U.K. FCA”), which regulates LIBO Rate, announced that the U.K. FCA will no longer persuade or compel banks to submit rates for the calculation of the LIBO Rate benchmark after 2021. This announcement indicates that the continuation of LIBO Rate on the current basis cannot and will not be guaranteed after 2021, and it appears likely that LIBO Rate will be discontinued or modified. The consequences of the discontinuance of the LIBO Rate 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 December 31, 2020 and 11 outstanding letters of credit for program and insurance requirements totaling approximately $21.2 million as of December 31, 2019.