New Notes Issuance/Note Redemption
1. Why did you issue new notes?
We issued new notes to redeem approximately $1.1 billion of near-term debt that was originally maturing in 2023 and 2024. The new notes consist of $850 million in aggregate principal amount of senior notes in two separate tranches, one for $425 million in aggregate principal amount of 5.875% senior notes due 2030 and the other for $425 million in aggregate principal amount of 6.125% senior notes due 2032. The net result of the issuance and redemptions is an approximately $300 million reduction to our total long-term debt. As a result, we have no material debt maturities for the next five years, providing us with significant financial flexibility.
2. What notes are you redeeming with the new issuance?
We redeemed five notes: 2.875% Senior Notes due 2023, 4.375% Senior Notes due 2023, 3.625% Senior Notes due 2024, 6.650% Senior Notes due 2024, and the 6.650% Senior Secured Notes due 2024.
3. When will the make-whole call settle for the existing notes?
The Make-whole call settled on March 14, 2022, for the 6.650% Senior Secured Notes and April 1, 2022, for the remaining notes. On those dates, the bondholders were repaid, and the notes retired.
4. Why did you offer to purchase certain series of Second Lien Notes?
We offered to purchase the Second Lien Notes at par to allow us to remove the collateral associated with the Notes as a result of these Notes acquiring investment grade status by two rating agencies, Moody’s on August 26, 2021 and Fitch on February 22, 2022. The collateral was released on March 8, 2022, and the remaining notes are now unsecured.
5. What was the collateral that secured the Second Lien Notes?
The collateral included 38 store locations, including 3 of our flagship locations, and 10 distribution centers.
Asset-Based Credit Facility (ABL Credit Facility)
6. Why did you amend your ABL Credit Facility?
We amended and replaced our prior ABL Credit Facility to extend the maturity (from May 2024 to March 2027), reduce interest expense and reduce unused facility fees.
7. Why did the size of the ABL Credit Facility remain the same?
Given the uncertainty of COVID-19 and geo-political issues, we believe the current size of the ABL Credit Facility ($3 billion) provides us with an ample amount of liquidity to protect us from these and other unforeseen risks.
Interest Expense Guidance
8. Is there any change to the interest expense guidance you gave on February 22, 2022, as a result of these transactions?
These transactions were contemplated in the interest expense guidance we gave on February 22, 2022, and therefore there was no change needed to our annual interest expense guidance of $190 million.
Note: See pages 3 and 4 for our remaining debt maturities and estimated sources and uses of cash for these transactions.
All forward-looking statements are subject to the safe harbor provisions of the Private Securities Litigation Reform Act of 1995. These forward-looking statements are subject to risks and uncertainties that could cause actual results to differ materially from those in the forward-looking statements. A detailed discussion of these factors and uncertainties is contained in the company's filings with the Securities and Exchange Commission.
Released April 6, 2022