Debt

9 Months Ended

Oct. 30, 2022

Debt Disclosure [Abstract]

Debt

DEBT

Debt consisted of the following:

	October 30, 2022				January 30, 2022
	Principal		Unamortized Discount and Debt Issuance Costs		Principal		Unamortized Discount and Debt Issuance Costs
Current maturities of long-term debt:
Senior Term Loan due July 2028	$	15	$	—	$	15	$	—
Long-term debt:
Senior ABL Credit Facility due July 2026	90		—		—		—
Senior Term Loan due July 2028	1,466		19		1,478		22
	1,556		19		1,478		22
Total	$	1,571	$	19	$	1,493	$	22

The Company’s debt obligations as of October 30, 2022 included the following debt agreements:

Senior Term Loan Facility

On July 27, 2021, Core & Main LP entered into a $1,500 million Senior Term Loan Facility, which matures on July 27, 2028. 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 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 Senior Term Loan Facility is subject to a LIBOR “floor” of 0.00%. The weighted average interest rate, excluding the effect of the interest rate swap, of Core & Main LP’s outstanding borrowings under the Senior Term Loan Facility as of October 30, 2022 was 6.53%. 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 $1,442 million as of October 30, 2022.

Asset-Based Credit Facility

On July 29, 2022, Core & Main LP amended the terms of the credit agreement governing the senior asset-based revolving credit facility (as amended, the “Senior ABL Credit Facility”) in order to, among other things, increase the aggregate amount of commitments under the asset-based revolving credit facility by $400 million to $1,250 million overall, subject to borrowing base availability, and implement a rate based on SOFR in lieu of LIBOR. The Senior ABL Credit Facility has a maturity date of July 27, 2026. Borrowings under the Senior ABL Credit Facility bear interest at either the SOFR 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 Senior ABL Credit Facility. Additionally, Core & Main LP pays a fee of 0.25% on unfunded commitments under the Senior ABL Credit Facility. As of October 30, 2022, there was $90 million outstanding under the Senior ABL Credit Facility with a weighted average interest rate of 4.14%. The book value of the Senior ABL Credit Facility approximates fair value due to the variable interest rate nature of these borrowings.

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 Senior 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 Senior 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 Senior ABL Credit Facility.

The aggregate amount of debt payments for the remainder of fiscal 2022 and the next four full fiscal years are as follows:

Fiscal 2022	$	4
Fiscal 2023	15
Fiscal 2024	15
Fiscal 2025	15
Fiscal 2026	105

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 million notional amount, which mirrored then outstanding borrowings under the Prior Term Loan Facility. On July 27, 2021, Core & Main LP repaid the approximately $1,258 million outstanding under the Prior Term Loan Facility and settled the interest rate swap.

	Nine Months Ended
Accumulated Other Comprehensive Loss	October 31, 2021
Beginning of period balance	$	(8)
Reclassification of expense to interest expense	4
Loss on debt modification and extinguishment	5
Tax expense on interest rate swap adjustments
Reclassification of expense to interest expense	(1)
Loss on debt modification and extinguishment	—
End of period balance	$	—

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 million. The notional amount decreases to $900 million on July 27, 2023, $800 million on July 27, 2024, and $700 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 30, 2022, 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 million of borrowings under the Senior Term Loan Facility.

The fair value of this cash flow interest rate swap was a $103 million and $31 million asset as of October 30, 2022 and January 30, 2022, respectively, which is included within other assets in the 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	October 30, 2022		October 31, 2021		October 30, 2022		October 31, 2021
Beginning of period balance	$	54	$	(2)	$	26	$	—
Measurement adjustment gain for interest rate swap	43		16		77		14
Reclassification of (income) expense to interest expense	(5)		2		(5)		2
Tax benefit (expense) on interest rate swap adjustments
Measurement adjustment gain for interest rate swap	(7)		(3)		(13)		(3)
Reclassification of (income) expense to interest expense	1		—		1		—
End of period balance	$	86	$	13	$	86	$	13

As of October 30, 2022, the Company estimates $41 million of the cash flow interest rate swap gains will be reclassified from accumulated other comprehensive income into earnings over the next 12 months.