Debt and Financing

Our outstanding debt as of June 30, 2019 consisted of the following:



As of June 30, 2019 (in millions)	Par Value			Discount			Debt Issuance Costs			Book Value			Average Effective Interest Rate
Term Loan	$	558.1		$	(6.5	)	$	(5.6	)	$	546.0		11.3	%	^(a)
ABL Facility	—			—			—			—			N/A
Secured Second A&R CDA	26.8			—			(0.1		)	26.7			8.0	%
Unsecured Second A&R CDA	46.7			—			(0.2		)	46.5			8.0	%
Lease financing obligations	233.4			—			(0.3		)	233.1			16.5	%	^(b)
Total debt	$	865.0		$	(6.5	)	$	(6.2	)	$	852.3
Current maturities of Term Loan	(14.3		)	—			—			(14.3		)
Current maturities of lease financing obligations	(2.6		)	—			—			(2.6		)
Current maturities of Unsecured Second A&R CDA	(1.5		)	—			—			(1.5		)
Long-term debt	$	846.6		$	(6.5	)	$	(6.2	)	$	833.9


(a)	Variable interest rate of 1, 3 or 6-month LIBOR, with a floor of 1.0%, plus a fixed margin of 8.50%.

(b) Interest rate for lease financing obligations is derived from the difference between total rent payment and calculated principal amortization over the life of lease agreements.

Liquidity

Our principal sources of liquidity are cash and cash equivalents, available borrowings under our asset-based loan facility (the

“ABL Facility”) and any prospective net cash flow from operations. As of June 30, 2019, our maximum availability under our ABL Facility was $81.6 million. Our Managed Accessibility was $39.3 million, which represents the maximum amount we would access on the ABL Facility and is adjusted for eligible receivables plus eligible borrowing base cash measured at June 30, 2019.

Our cash and cash equivalents and Managed Accessibility were $156.8 million.

For the December 31, 2018 borrowing base certificate, which was filed in January of 2019, we transferred $25.0 million of cash into restricted cash to maintain the 10% threshold, as permitted under the ABL Facility, which transfer effectively put our cash and cash equivalents and Managed Accessibility to $203.8 million.

The table below summarizes cash and cash equivalents and Managed Accessibility as of June 30, 2019 and December 31, 2018:



(in millions)	June 30, 2019		December 31, 2018
Cash and cash equivalents	$	117.5	$	227.6
Changes to restricted cash	—		(25.0		)
Managed Accessibility	39.3		1.2
Total cash and cash equivalents and Managed Accessibility	$	156.8	$	203.8

Credit Facility Covenants

The credit agreement (the “Term Loan Agreement”) governing our term loan facility (the “Term Loan”) has certain financial covenants, that, among other things, restrict certain capital expenditures and require us to comply with a maximum total leverage ratio covenant (defined as Consolidated Total Debt divided by Consolidated Adjusted EBITDA as defined below).

Our total maximum leverage ratio covenants are as follows:



Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio	Four Consecutive Fiscal Quarters Ending	Maximum Total Leverage Ratio
June 30, 2019	3.25 to 1.00	September 30, 2020	2.75 to 1.00
September 30, 2019	3.25 to 1.00	December 31, 2020	2.75 to 1.00
December 31, 2019	3.00 to 1.00	March 31, 2021	2.75 to 1.00
March 31, 2020	3.00 to 1.00	June 30, 2021 and thereafter	2.50 to 1.00
June 30, 2020	3.00 to 1.00

Consolidated Adjusted EBITDA, defined in our Term Loan Agreement as “Consolidated EBITDA,” is a measure that reflects our earnings before interest, taxes, depreciation, and amortization expense, and is further adjusted for, among other things, letter of credit fees, equity-based compensation expense, net gains or losses on certain property disposals, restructuring charges, transaction costs related to issuances of debt, non-recurring consulting fees, non-cash impairment charges and the gains or losses from permitted dispositions, union vacation restoration charges and discontinued operations. Consolidated Total Debt, as defined in our Term Loan Agreement, is the aggregate principal amount of indebtedness outstanding. Our total leverage ratio for the four consecutive fiscal quarters ending June 30, 2019 was 3.12 to 1.00.

Impacts to our consolidated financial statements due to the implementation of ASC 842, Leases, on January 1, 2019 did not impact our calculation of the financial covenants included in our Term Loan Agreement as changes in generally accepted accounting principles subsequent to the date of the agreement are not required to be implemented for purposes of covenant calculations.

Risks and Uncertainties Regarding Compliance with Credit Facility Financial Covenants

We believe that our results of operations will be sufficient to allow us to comply with the covenants in the Term Loan Agreement for at least the next twelve months. Our ability to satisfy our liquidity needs and meet our future covenants during the next twelve months and thereafter is dependent upon our ability to achieve operating results that reflect improvement over our first half 2019 results. Although we are currently in compliance with the maximum total leverage ratio covenant under our Term Loan Agreement, the covenant levels tighten in the coming quarters. Means for improving our profitability include successful implementation of network optimization, and the realization of pricing, productivity and efficiency initiatives, as well as increased volume, all of which may not be within our control. If we are unable to achieve the improved results required to comply with this covenant in one or more quarters over the next twelve months, we will need to take more specific actions as described below.

We may decide to pay down a sufficient amount of the Term Loan to comply with the covenant. We currently believe that the results of our operations will be sufficient to allow us to make such payments and fund our operations for the next twelve months. Means for improving our ability to make such payments may include the requirement to pursue certain actions, including but not limited to, reducing capital expenditures for revenue equipment and technology, accelerating terminal closures identified through the network optimization plan, reducing headcount, and seeking additional cost reductions in the organization, all of which may not be within our control. Some of those actions might adversely affect our operations and financial performance over the long-term.

The Company is currently pursuing new financing alternatives, including a potential refinancing of the Term Loan Agreement to provide for less restrictive financial covenants, as well as potentially lowering interest rates and extending the maturity of the facility as compared to our current Term Loan Agreement.

Fair Value Measurement

The book value and estimated fair values of our long-term debt, including current maturities and other financial instruments, are summarized as follows:



	June 30, 2019				December 31, 2018
(in millions)	Book Value		Fair value		Book Value		Fair value
Term Loan	$	546.0	$	555.0	$	559.4	$	546.0
Lease financing obligations	233.1		232.4		242.2		234.7
Second A&R CDA	73.2		73.1		73.3		70.0
Total debt	$	852.3	$	860.5	$	874.9	$	850.7

The fair values of the Term Loan and the Second Amended and Restated Contribution Deferral Agreement (the “Second A&R CDA”) were estimated based on observable prices (level two inputs for fair value measurements). The fair value of the lease financing obligations is estimated using a publicly-traded secured loan with similar characteristics (level three input for fair value measurement).