Long-term Debt and Borrowing Facilities

3 Months Ended

Apr. 29, 2023

Long-Term Debt, by Current and Noncurrent [Abstract]

The following table provides the Company's outstanding debt balance, net of unamortized debt issuance costs and discounts, as of April 29, 2023, January 28, 2023 and April 30, 2022:


	April 29, 2023		January 28, 2023		April 30, 2022
	(in millions)
Senior Secured Debt with Subsidiary Guarantee
$394 million Term Loan due August 2028 (“Term Loan Facility”)	$	387	$	387	$	389
Asset-based Revolving Credit Facility due August 2026 (“ABL Facility”)	295		295		—
Total Senior Secured Debt with Subsidiary Guarantee	682		682		389
Senior Debt with Subsidiary Guarantee
$600 million, 4.625% Fixed Interest Rate Notes due July 2029 (“2029 Notes”)	593		593		592
Total Senior Debt with Subsidiary Guarantee	593		593		592

Total	1,275		1,275		981
Current Debt	(4)		(4)		(4)
Total Long-term Debt, Net of Current Portion	$	1,271	$	1,271	$	977

Cash paid for interest was $13 million and $4 million for the first quarter of 2023 and first quarter of 2022, respectively.

Credit Facilities

On August 2, 2021, the Company entered into a term loan B credit facility in an aggregate principal amount of $400 million, which will mature in August 2028. The discounts and issuance costs from the Term Loan Facility are being amortized through the maturity date and are included within Long-term Debt on the Consolidated Balance Sheets. Commencing in December 2021, the Company is required to make quarterly principal payments on the Term Loan Facility in an amount equal to 0.25% of the original principal amount of $400 million. The Company made principal payments of $1 million for the Term Loan Facility during both the first quarter of 2023 and the first quarter of 2022.

Interest under the Term Loan Facility is calculated by reference to the London Interbank Offered Rate (“LIBOR”) or an alternative base rate, plus an interest rate margin equal to (i) in the case of LIBOR loans, 3.25% and (ii) in the case of alternate base rate loans, 2.25%. The LIBOR rate applicable to the Term Loan Facility is subject to a floor of 0.50%. The obligation to pay principal and interest on the loans under the Term Loan Facility is jointly and severally guaranteed on a full and unconditional basis by certain of the Company's wholly-owned domestic subsidiaries. The loans under the Term Loan Facility are secured on a first-priority lien basis by certain assets of the Company and guarantors that do not constitute priority collateral of the ABL Facility and on a second-priority lien basis by priority collateral of the ABL Facility, subject to customary exceptions. As of April 29, 2023, the interest rate on the loans under the Term Loan Facility was 8.24%.

On May 8, 2023, subsequent to the end of the first quarter of 2023, the Company amended its Term Loan Facility to allow for an early transition to using the Secured Overnight Financing Rate (“SOFR”) instead of LIBOR. In accordance with the amendment, interest on SOFR loans under the Term Loan Facility will be calculated by reference to SOFR, plus an interest rate margin ranging from 3.36% to 3.68%.

On August 2, 2021, the Company also entered into a senior secured asset-based revolving credit facility. The ABL Facility allows for borrowings and letters of credit in U.S. dollars or Canadian dollars and has aggregate commitments of $750 million and an expiration date of August 2026. The availability under the ABL Facility is the lesser of (i) the borrowing base, determined primarily based on the Company's eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property, and (ii) the aggregate commitment. Interest on the loans under the ABL Facility is calculated by reference to (i) LIBOR or an alternative base rate and (ii) in the case of loans denominated in Canadian dollars, Canadian Dollar Offered Rate (“CDOR”) or a Canadian base rate, plus an interest rate margin based on average daily excess availability ranging from (x) in the case of LIBOR and CDOR loans, 1.50% to 2.00% and (y) in the case of alternate base rate loans and Canadian base rate loans, 0.50% to 1.00%. Unused commitments under the ABL Facility accrue an unused commitment fee ranging from 0.25% to 0.30%. The obligation to pay principal and interest on the loans under the ABL Facility is jointly and severally guaranteed on a full and unconditional basis by certain of the Company's wholly-owned domestic and Canadian subsidiaries. The loans under the ABL Facility are secured on a first-priority lien basis by the Company's eligible U.S. and Canadian credit card receivables, eligible accounts receivable, eligible inventory and eligible real property and on a second-priority lien basis on substantially all other assets of the Company, subject to customary exceptions.

During the first quarter of 2023, the Company borrowed $15 million and made payments of $15 million under the ABL Facility. As of April 29, 2023, there were borrowings of $295 million outstanding under the ABL Facility and the interest rate on the borrowings was 6.71%. The Company had $30 million of outstanding letters of credit as of April 29, 2023 that further reduced its availability under the ABL Facility. As of April 29, 2023, the Company's remaining availability under the ABL Facility was $308 million.

On May 8, 2023, subsequent to the end of the first quarter of 2023, the Company amended its ABL Facility to allow for an early transition to using SOFR instead of LIBOR. In accordance with the amendment, interest on SOFR loans under the ABL Facility will be calculated by reference to SOFR, plus an interest rate margin based on average daily excess availability ranging from 1.60% to 2.10%.

The Company's long-term debt and borrowing facilities contain certain financial and other covenants, including, but not limited to, the maintenance of financial ratios. The 2029 Notes and the Term Loan Facility include the maintenance of a consolidated coverage ratio and a consolidated total leverage ratio, and the ABL Facility includes the maintenance of a fixed charge coverage ratio and a debt to earnings before interest, income taxes, depreciation, amortization and rent (“EBITDAR”) ratio. The financial covenants could, within specific predefined circumstances, limit the Company's ability to incur additional indebtedness, make certain investments, pay dividends or repurchase shares. As of April 29, 2023, the Company was in compliance with all covenants under its long-term debt and borrowing facilities.