Debt

9 Months Ended

Oct. 31, 2021

Debt Disclosure [Abstract]

Debt

DEBT

Debt consisted of the following:

	October 31, 2021				January 31, 2021
	Principal		Unamortized Discount and Debt Issuance Costs		Principal		Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
Senior Term Loan due August 2024	$	—	$	—	$	13.0	$	—
Senior Term Loan due July 2028	15.0		—		—		—
Long-term debt:
Senior Term Loan due August 2024	—		—		1,248.0		19.1
Senior Notes due September 2024	—		—		300.0		8.9
Senior Notes due August 2025	—		—		750.0		14.8
ABL Credit Facility due July 2026	—		—		—		3.5
Senior Term Loan due July 2028	1,481.3		22.3		—		—
	1,481.3		22.3		2,298.0		46.3
Total	$	1,496.3	$	22.3	$	2,311.0	$	46.3

Debt Transactions

On July 27, 2021, Core & Main LP: (i) amended the terms of the credit agreement governing the senior term loan facility in an aggregate principal amount of $1,300.0 million maturing on August 1, 2024 issued by Core & Main LP (the “Prior Term Loan Facility”) in order to, among other things, enter into a new $1,500.0 million seven-year senior term loan (the “Senior Term Loan Facility”) and (ii) amended the terms of the credit agreement governing the senior asset-based revolving credit facility in order to, among other things, increase the aggregate amount of commitments by $150.0 million to $850.0 million overall and extend the maturity date from July 2024 to July 2026 (as amended, the “ABL Credit Facility”). Core & Main LP and Holdings utilized the net proceeds from the IPO, together with the net proceeds from borrowings under the Senior Term Loan Facility and cash on hand, to redeem (i) all $300.0 million aggregate principal amount of the senior unsecured notes due September 15, 2024 issued by Holdings (the “Senior 2024 Notes”) then outstanding at a redemption price equal to 102.000% of the aggregate principal amount thereof and (ii) all $750.0 million aggregate principal amount of the senior unsecured notes due August 15, 2025 issued by Core & Main LP (the “Senior 2025 Notes”) then outstanding at a redemption price equal to 101.531% of the aggregate principal amount thereof, plus, in each case, accrued and unpaid interest, by satisfying and discharging the indenture governing the Senior 2025 Notes at the closing of the IPO and redeeming the Senior 2025 Notes on August 15, 2021. Additionally, Core & Main LP repaid $1,257.8 million outstanding under the Prior Term Loan Facility, plus accrued and unpaid interest, and settled the interest rate swap associated with the Prior Term Loan Facility (collectively, the “Refinancing Transactions”).

The Company recorded a loss on debt modification and extinguishment of $50.7 million for the nine months ended October 31, 2021. The loss on debt modification and extinguishment included (i) the write off of $7.7 million in deferred financing fees associated with the redemption of the Senior 2024 Notes, (ii) the write off of $13.2 million in deferred financing fees associated with the redemption of the Senior 2025 Notes, (iii) the write off of $4.8 million in deferred financing fees associated with the settlement of the Prior Term Loan Facility, (iv) redemption premiums of $6.0 million and $11.5 million for the Senior 2024 Notes and Senior 2025 Notes, respectively, (v) the settlement of the cash flow interest rate swap of $5.2 million which had its changes in fair value previously attributed to accumulated other comprehensive loss, and (vi) third-party expenses for the Senior Term Loan Facility of $2.3 million.

The remaining debt obligations as of October 31, 2021 include the following debt agreements:

Senior Term Loan Facility

On July 27, 2021, Core & Main LP entered into the Senior Term Loan Facility that matures on July 27, 2028, with an aggregate principal amount of $1,500.0 million. The Senior Term Loan Facility requires quarterly principal payments, payable on the last business day of each fiscal quarter in an amount equal to approximately 0.25% of the original principal amount of the Senior Term Loan Facility. The first quarterly principal payment was made on October 29, 2021. The remaining balance is payable upon final maturity of the Senior Term Loan Facility on July 27, 2028. The Senior Term Loan Facility bears interest at a rate equal to (i) LIBOR plus, in each case, an applicable margin of 2.50% or (ii) the base rate, which will be the highest of (x) the corporate base rate established by the administrative agent as its prime rate in effect at its principal office in New York City from time to time, (y) the overnight federal funds rate plus 0.50% per annum and (z) one-month LIBOR (adjusted for maximum reserves) plus 1.00% per annum, plus, in each case, an applicable margin of 1.50%. The weighted average interest rate, excluding the effect of an interest rate swap, of Core & Main LP’s outstanding borrowings under the Senior Term Loan Facility as of October 31, 2021 was 2.59%. See further discussion of the interest rate swap below. Based on quotes from financial institutions (i.e., level 2 of the fair value hierarchy), the fair value of the Senior Term Loan Facility was $1,483.2 million at October 31, 2021.

Asset-Based Credit Facility

Core & Main LP has an asset-based revolving credit facility with a borrowing capacity of up to $850.0 million, subject to borrowing base availability, with a maturity date of July 27, 2026. Borrowings under the ABL Credit Facility bear interest at either a LIBOR rate plus an applicable margin ranging from 1.25% to 1.75%, or an alternate base rate plus an applicable margin ranging from 0.25% to 0.75%, depending on the borrowing capacity under the ABL Credit Facility. Additionally, Core & Main LP pays a fee of 0.25% on unfunded commitments under the ABL Credit Facility. The book value of the ABL Credit Facility approximates fair value due to the variable interest rate nature of these borrowings; however there were no amounts outstanding as of October 31, 2021.

The aforementioned debt agreements include customary affirmative and negative covenants, which include, among other things, restrictions on Core & Main LP’s ability to pay dividends, create liens, incur additional indebtedness, make investments, dispose of assets and merge or consolidate with any other person. The Senior Term Loan Facility may require accelerated repayment based upon cash flows generated in excess of operating and investing requirements when the Consolidated Secured Leverage Ratio (as defined in the agreement governing the Senior Term Loan Facility) is greater than or equal to 3.25. In addition, the ABL Credit Facility requires Core & Main LP to comply with a consolidated fixed charge coverage ratio of greater than or equal to 1.00 when availability under the ABL Credit Facility is less than 10.0% of the lesser of (i) the then applicable borrowing base or (ii) the then aggregate effective commitments.

Substantially all of Core & Main LP’s assets are pledged as collateral for the Senior Term Loan Facility and the ABL Credit Facility.

The aggregate amount of debt payments for the remainder of fiscal 2021 and the next four full fiscal years are as follows:

Fiscal 2021	$	3.8
Fiscal 2022	15.0
Fiscal 2023	15.0
Fiscal 2024	15.0
Fiscal 2025	15.0

Interest Rate Swaps

On February 28, 2018, Core & Main LP entered into an instrument pursuant to which it made payments to a third party based upon a fixed interest rate of 2.725% and received payments based upon the three-month LIBOR rate, based on a $500.0 million notional amount, which mirrored then outstanding borrowings under the Prior Term Loan Facility. On July 27, 2021, Core & Main LP repaid the approximately $1,257.8 million outstanding under the Prior Term Loan Facility and settled the interest rate swap. As of July 27, 2021, the remaining interest rate swap liability of $5.2 million was repaid as part of this settlement, and the associated accumulated other comprehensive loss was reclassified to the loss on debt modification and extinguishment as the interest rate swap interest payments will no longer occur.

	Three Months Ended				Nine Months Ended
Accumulated Other Comprehensive Loss	October 31, 2021		November 1, 2020		October 31, 2021		November 1, 2020
Beginning of period balance	$	—	$	(11.8)	$	(7.9)	$	(11.0)
Measurement adjustment (losses) for interest rate swap	—		(0.1)		—		(4.3)
Reclassification of expense to interest expense	—		2.2		9.3		5.5
Tax (expense) benefit on interest rate swap adjustments
Measurement adjustment (losses) for interest rate swap	—		—		—		0.6
Reclassification of expense to interest expense	—		(0.3)		(1.4)		(0.8)
End of period balance	$	—	$	(10.0)	$	—	$	(10.0)

On July 27, 2021, Core & Main LP entered into an instrument in which it makes payments to a third-party based upon a fixed interest rate of 0.74% and receives payments based upon the one-month LIBOR rate, based on notional amounts associated with borrowings under the Senior Term Loan Facility. The measurement period of the interest rate swap commenced on July 27, 2021 with a notional amount of $1,000.0 million. The notional amount decreases to $900.0 million on July 27, 2023, $800.0 million on July 27, 2024, and $700.0 million on July 27, 2025 through the instrument maturity on July 27, 2026. This instrument is intended to reduce the Company's exposure to variable interest rates under the Senior Term Loan Facility. As of October 31, 2021, this instrument resulted in an effective fixed rate of 3.24%, based upon the 0.74% fixed rate plus an applicable margin of 2.50%, on $1,000.0 million of borrowings under the Senior Term Loan Facility.

The fair value of this cash flow interest rate swap was a $15.7 million asset as of October 31, 2021, which is included within other assets in its Balance Sheet. Fair value is based upon the present value of future cash flows under the terms of the contract and observable market inputs (level 2). Significant inputs used in determining fair value include forward-looking one-month LIBOR rates and the discount rate applied to projected cash flows.

	Three Months Ended		Nine Months Ended
Accumulated Other Comprehensive Income (Loss)	October 31, 2021		October 31, 2021
Beginning of period balance	$	(1.3)	$	—
Measurement adjustment gain for interest rate swap	15.5		14.0
Reclassification of expense to interest expense	1.7		1.7
Tax expense on interest rate swap adjustments
Measurement adjustment gain for interest rate swap	(2.5)		(2.3)
Reclassification of expense to interest expense	(0.3)		(0.3)
End of period balance	$	13.1	$	13.1