Debt

9 Months Ended

Oct. 29, 2023

Debt Disclosure [Abstract]

Debt

DEBT

Debt consisted of the following:

	October 29, 2023				January 29, 2023
	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	—		—		—		—
Senior Term Loan due July 2028	1,451		15		1,463		19
	1,451		15		1,463		19
Total	$	1,466	$	15	$	1,478	$	19

The Company’s debt obligations as of October 29, 2023 included the following debt agreements:

Senior Term Loan Facility

On February 26, 2023, Core & Main LP amended the terms of the $1,500 million seven-year senior term loan which matures on July 27, 2028 (as amended, the “Senior Term Loan Facility”) in order to implement a forward-looking rate based on Term SOFR in lieu of LIBOR. 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) Term SOFR plus, in each case, an effective applicable margin of 2.60% 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 Term SOFR (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 Term SOFR “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 29, 2023 was 7.97%. 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 $1,461 million as of October 29, 2023.

Asset-Based Credit Facility

Core & Main LP has a senior asset-based revolving credit facility with a borrowing capacity of up to $1,250 million, subject to borrowing base availability, with a maturity date of July 27, 2026 (the “Senior ABL Credit Facility”). Borrowings under the Senior ABL Credit Facility bear interest at either a Term 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. There were no amounts outstanding under the Senior ABL Credit Facility as of October 29, 2023 and January 29, 2023.

The aforementioned debt agreements include customary affirmative and negative covenants, which include, among other things, restrictions on Core & Main LP’s ability to make distributions, 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. The Company was in compliance with all debt covenants as of October 29, 2023.

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 2023 and the next four full fiscal years are as follows:

Fiscal 2023	$	4
Fiscal 2024	15
Fiscal 2025	15
Fiscal 2026	15
Fiscal 2027	15

Interest Rate Swaps

On February 26, 2023, Core & Main LP amended the terms of the instrument to adjust the fixed interest rate to 0.693% and receive payments based upon the one-month Term SOFR rate, based on notional amounts associated with borrowings under the Senior Term Loan Facility. The interest rate swap has a notional amount of $900 million as of October 29, 2023. The notional amount decreases to $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 29, 2023, this instrument resulted in an effective fixed rate of 3.293%, based upon the 0.693% fixed rate plus an effective applicable margin of 2.60%.

The fair value of this cash flow interest rate swap was an $82 million and $84 million asset as of October 29, 2023 and January 29, 2023, respectively, which is included within other assets in the Balance Sheet. The cash flows related to settlement of the interest rate swap are classified in the consolidated statements of cash flows based on the nature of the underlying hedged items. 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 Term SOFR rates and the discount rate applied to projected cash flows.

	Three Months Ended				Nine Months Ended
Accumulated Other Comprehensive Income	October 29, 2023		October 30, 2022		October 29, 2023		October 30, 2022
Beginning of period balance	$	70	$	54	$	70	$	26
Measurement adjustment gain (loss) for interest rate swap	8		43		29		77
Reclassification of (income) to interest expense	(11)		(5)		(32)		(5)
Tax benefit (expense) on interest rate swap adjustments
Measurement adjustment gain (loss) for interest rate swap	(1)		(7)		(5)		(13)
Reclassification of (income) to interest expense	—		1		4		1
End of period balance	$	66	$	86	$	66	$	86

As of October 29, 2023, 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.