Debt

On February 7, 2019, we entered into a $1.5 billion syndicated credit agreement with a five-year term (the “Credit Facility”) primarily to pay a dividend to Henry Schein, as well as provide funding for working capital and general corporate purposes. The Credit Facility is comprised of the following:



	Total Amount		Amount Available as of
	Total Amount		December 31, 2019
Term loan	$	1,200	$	—
Revolving line of credit ^(a)	300		281
Total Credit Facility ^(b)	$	1,500	$	281

(a) Letters of credit reduce our borrowing capacity under the revolving line of credit. At December 31, 2019, we had $19 million for letters of credit outstanding against the total $35 million sub-limit available.
(b) We paid $24 million of debt issuance costs related to the Credit Facilities which we deferred and amortize on an effective yield basis to interest expense. The unamortized portion at December 31, 2019 was $20 million.

In February 2020, the Credit Facility was amended, and the revised terms are reflected below.

The term loan and revolving line of credit bear interest on a floating rate basis at our option and incur fees as follows:


•	LIBOR (ranging from one month to 12 months) subject to a floor of 0.00%


◦	plus, an applicable margin ranging from 1.25% to 2.50% annually based on our leverage ratio at the end of the prior quarter.


•	Alternative base rate subject to a floor of 1.00%


◦	plus, an applicable margin ranging from 0.25% to 1.50% annually based on our leverage ratio at the end of the prior quarter.


•	Unused capacity under the revolving line of credit loan incurs a fee ranging from 0.175% to 0.400% per annum based on our leverage ratio at the end of the prior quarter.


•	Additionally, customary letter of credit fees, as well as fronting fees, are incurred for letters of credit outstanding.

The applicable margins on LIBOR and alternative base rate borrowings fluctuated over the course of 2019. As of December 31, 2019, the applicable margins on LIBOR and alternative base rate borrowings were 2.25% and 1.25%, respectively, for both the term loan and revolving line of credit. The commitment fee for the revolving line of credit as of December 31, 2019 was 0.35%.

Starting March 31, 2020, the term loan amortizes in quarterly installments equal to 5.00% per annum of the initial borrowed amount and requires full payment at maturity of all remaining amounts owed. No amortizing payments are required for the revolving line of credit, however all amounts owed are due at maturity. We have the option to prepay both the term loan and revolving line of credit without penalty, subject to certain conditions. If the aggregate balance of loans outstanding exceeds the lender's commitments made to the revolving line of credit at any time, then the amount of such excess is required to be prepaid. Mandatory prepayments of the term loan are required in an amount equal to the net cash proceeds of, subject to specific conditions, (i) certain assets sales, (ii) certain debt offerings, and (iii) certain insurance recovery and condemnation events. We plan to use a portion of the expected net cash proceeds from the sale of our scil animal-care business in an amount up to $60 million to prepay the 2020 quarterly term loan amortization payments.

Additionally, the Credit Facility limits or restricts our ability, subject to certain exceptions, to:


•	incur additional indebtedness,


•	make dividends and other restricted payments,


•	incur additional liens,


•	consolidate, merge, sell, or otherwise dispose of all or substantially all assets,


•	make investments,


•	transfer or sell assets,


•	enter into restrictive agreements,


•	change the nature of the business, and


•	enter certain transactions with affiliates.

Starting April 1, 2019, we were required to maintain a leverage ratio of less than 5.50:1.00. The leverage ratio covenant decreases annually, starting with a reduction to 5.00:1.00 in 2021 and decreasing down to 3.75:1.00 in 2022. We must also maintain a net interest coverage ratio of no less than 3.00:1.00 at the end of each quarter. We were in compliance with all financial covenants as of and for the year ended December 31, 2019.

We continuously monitor our compliance with the terms and conditions of our Credit Facility and take such actions as are necessary to attain and ensure compliance.

The Credit Facility is guaranteed by Covetrus, the subsidiary borrower, and its subsidiary guarantors. We have pledged substantially all tangible and intangible assets, as well as our ownership interests in certain subsidiary companies, in support of the Credit Facility.

Long-term debt as of December 29, 2018 consisted primarily of a $23 million term loan. Prior to the separation and distribution date of February 7, 2019, the Animal Health Business’ long-term debt of $23 million was repaid by the Former Parent.

The following table presents the maturities of our Long-term debt and other borrowings as of December 31, 2019:



	Credit Facility			Other Debt			Total Repayments
2020	$	60		$	2		$	62
2021	60			—			60
2022	60			—			60
2023	60			5			65
2024	960			—			960
Total debt maturities	1,200			7			1,207
Less: current maturities	(60		)	(2		)	(62		)
Less: unamortized debt issuance costs	(20		)	—			(20		)
Long-term maturities	$	1,120		$	5		$	1,125