LONG-TERM DEBT

6 Months Ended

Jan. 29, 2022

Debt Disclosure [Abstract]

LONG-TERM DEBT

NOTE 8—LONG-TERM DEBT

The Company’s long-term debt consisted of the following:

(in millions)	Average Interest Rate at January 29, 2022	Fiscal Maturity Year	January 29, 2022		July 31, 2021
Term Loan Facility	3.35%	2026	$	844	$	1,002
ABL Credit Facility	1.54%	2024	990		701
Senior Notes	6.75%	2029	500		500
Other secured loans	5.14%	2024-2025	30		37
Debt issuance costs, net			(28)		(35)
Original issue discount on debt			(13)		(17)
Long-term debt, including current portion			2,323		2,188
Less: current portion of long-term debt			(14)		(13)
Long-term debt			$	2,309	$	2,175

Senior Notes

On October 22, 2020, the Company issued $500 million of unsecured 6.750% Senior Notes due October 15, 2028 (the “Senior Notes”). The Senior Notes are guaranteed by each of the Company’s subsidiaries that are borrowers under or that guarantee the ABL Credit Facility (defined below) or the Term Loan Facility (defined below).

ABL Credit Facility

The ABL Loan Agreement by and among the Company and United Natural Foods West, Inc. (together with the Company, the “U.S. Borrowers”) and UNFI Canada, Inc. (the “Canadian Borrower” and, together with the U.S. Borrowers, the “Borrowers”), the financial institutions that are parties thereto as lenders (collectively, the “ABL Lenders”), Bank of America, N.A. as administrative agent for the ABL Lenders, Bank of America, N.A. (acting through its Canada branch), as Canadian agent for the ABL Lenders, and the other parties thereto, provides for a secured asset-based revolving credit facility (the “ABL Credit Facility” and the loans thereunder, the “ABL Loans”), of which up to (i) $2,050 million is available to the U.S. Borrowers and (ii) $50 million is available to the Canadian Borrower. The ABL Loan Agreement also provides for (i) a $300 million sublimit of availability for letters of credit of which there is a further $25 million sublimit for the Canadian Borrower. Under the ABL Loan Agreement, the Borrowers may, at their option, increase the aggregate amount of the ABL Credit Facility in an amount of up to $600 million without the consent of any ABL Lenders not participating in such increase, subject to certain customary conditions and applicable lenders committing to provide the increase in funding. There is no assurance that additional funding would be available.

The Borrowers’ obligations under the ABL Credit Facility are guaranteed by most of the Company’s wholly-owned subsidiaries (collectively, the “Guarantors”), subject to customary exceptions and limitations. The Borrowers’ obligations under the ABL Credit Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on all of the Borrowers’ and Guarantors’ accounts receivable, inventory and certain other assets arising therefrom or related thereto (including substantially all of their deposit accounts, collectively, the “ABL Assets”) and (ii) a second-priority lien on all of the Borrowers’ and Guarantors’ assets that do not constitute ABL Assets, in each case, subject to customary exceptions and limitations.

Availability under the ABL Credit Facility is subject to a borrowing base (the “Borrowing Base”), which is based on 90% of eligible accounts receivable, plus 90% of eligible credit card receivables, plus 90% of the net orderly liquidation value of eligible inventory, plus 90% of eligible pharmacy receivables, plus certain pharmacy prescription files availability of the Borrowers, after adjusting for customary reserves, but at no time shall exceed the lesser of the aggregate commitments under the ABL Credit Facility (currently $2,100 million) or the Borrowing Base.

The assets included in the Condensed Consolidated Balance Sheets securing the outstanding obligations under the ABL Credit Facility on a first-priority basis, and the unused credit and fees under the ABL Credit Facility, were as follows:

Assets securing the ABL Credit Facility (in millions)(1):	January 29, 2022		July 31, 2021
Certain inventory assets included in Inventories, net and Current assets of discontinued operations	$	2,454	$	2,297
Certain receivables included in Accounts receivable, net and Current assets of discontinued operations	$	1,158	$	1,041

(1)The ABL Credit Facility is also secured by all of the Company’s pharmacy prescription files, which are included in Intangibles, net in the Condensed Consolidated Balance Sheets. Refer to Note 5—Goodwill and Intangible Assets, Net for additional information.

As of January 29, 2022, the U.S. Borrowers’ Borrowing Base, net of $178 million of reserves, was $2,439 million, which is above the $2,050 million limit of availability to the U.S. Borrowers under the ABL Credit Facility. As of January 29, 2022, the Canadian Borrower’s Borrowing Base, net of $5 million of reserves, was $46 million, which is below the $50 million limit of availability to the Canadian Borrower under the ABL Credit facility, resulting in total availability of $2,096 million for ABL Loans and letters of credit under the ABL Credit Facility. As of January 29, 2022, the U.S. Borrowers had $990 million of ABL Loans and the Canadian Borrower had no ABL Loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of $6 million and are included in Long-term debt on the Condensed Consolidated Balance Sheets. As of January 29, 2022, the U.S. Borrowers had $115 million in letters of credit and the Canadian Borrower had no letters of credit outstanding under the ABL Credit Facility. The Company’s resulting remaining availability under the ABL Credit Facility was $991 million as of January 29, 2022.

ABL availability (in millions):	January 29, 2022
Total availability for ABL Loans and letters of credit	$	2,096
ABL Loans	$	990
Letters of credit	$	115
Unused credit	$	991

The applicable interest rates, letter of credit fees and unutilized commitment fees under the ABL Credit Facility are variable and are dependent upon the prior fiscal quarter’s daily Average Availability (as defined in the ABL Agreement), and were as follows:

Interest rates and fees under the ABL Credit Facility:	Range of Facility Rates and Fees (per annum)	January 29, 2022
U.S. and Canadian Borrowers’ applicable margin for base rate loans	—% - 0.50%	0.25	%
U.S. and Canadian Borrowers’ applicable margin for LIBOR and BA loans(1)	1.00% - 1.50%	1.25	%
Unutilized commitment fees	0.25% - 0.375%	0.25	%
Letter of credit fees	1.125% - 1.625%	1.375	%

(1) The U.S. Borrowers utilize LIBOR-based loans and the Canadian Borrower utilizes bankers’ acceptance rate-based loans.

The ABL Loan Agreement contains provisions for the transition to an alternative rate of interest in the event that LIBOR is no longer available.

Term Loan Facility

The Term Loan Agreement, by and among the Company and Supervalu (collectively, the “Term Borrowers”), the financial institutions that are parties thereto as lenders, Credit Suisse, as administrative agent for the Lenders, and the other parties thereto, provides for senior secured first lien term loans in an initial aggregate principal amount of $1,800 million in a seven-year tranche (the “Term Loan Facility”). The loans under the Term Loan Facility will be payable in full on October 22, 2025.

Under the Term Loan Agreement, the Company may, at its option, increase the amount of the Term Loan Facility, add one or more additional tranches of term loans or add one or more additional tranches of revolving credit commitments, without the consent of any Term Lenders not participating in such additional borrowings, up to an aggregate amount of $656 million plus additional amounts based on satisfaction of certain leverage ratio tests, subject to certain customary conditions and applicable lenders committing to provide the additional funding. There can be no assurance that additional funding would be available.

The obligations under the Term Loan Facility are guaranteed by the Guarantors, subject to customary exceptions and limitations. The Term Borrowers’ obligations under the Term Loan Facility and the Guarantors’ obligations under the related guarantees are secured by (i) a first-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ assets other than the ABL Assets and (ii) a second-priority lien on substantially all of the Term Borrowers’ and the Guarantors’ ABL Assets, in each case, subject to customary exceptions and limitations, including an exception for owned real property with net book values of less than $10 million. As of January 29, 2022 and July 31, 2021, there was $668 million and $676 million, respectively, of owned real property pledged as collateral that was included in Property and equipment, net in the Condensed Consolidated Balance Sheets.

The Company must prepay loans outstanding under the Term Loan Facility no later than 130 days after the fiscal year end in an aggregate principal amount equal to a specified percentage (which percentage ranges from 0 to 75 percent depending on the Consolidated First Lien Net Leverage Ratio as of the last day of such fiscal year) of Excess Cash Flow (as defined in the Term Loan Agreement), minus certain types of voluntary prepayments of indebtedness made during such fiscal year. Based on the Company’s Consolidated First Lien Net Leverage Ratio at the end of fiscal 2021, no prepayment from Excess Cash Flow in fiscal 2021 is required to be made in fiscal 2022. The potential amount of prepayment from Excess Cash Flow in fiscal 2022 that may be required in fiscal 2023 is not reasonably estimable as of January 29, 2022.

As of January 29, 2022, the Company had borrowings of $844 million outstanding under the Term Loan Facility, which are presented in the Condensed Consolidated Balance Sheets net of debt issuance costs of $15 million and an original issue discount on debt of $12 million. As of January 29, 2022, no amount of the Term Loan Facility was classified as current.

As of January 29, 2022, the borrowings under the Term Loan Facility bear interest at rates that, at the Term Borrowers’ option, can be either: (i) a base rate plus a margin of 2.25% or (ii) a LIBOR rate plus a margin of 3.25%; provided that the LIBOR rate shall never be less than 0.0%. The Term Loan Agreement contains provisions for the establishment of an alternative rate of interest in the event that LIBOR is no longer available.

On November 10, 2021, the Company entered into an amendment (the “Second Term Loan Amendment”) amending the Term Loan Agreement. The amendment provides for (i) the reduction of the applicable margin for LIBOR loans from 3.50% to 3.25% and the applicable margin for base rate loans from 2.50% to 2.25%, and (ii) other administrative changes. The amendment did not change the aggregate amount or maturity date of the Term Loan Facility. In conjunction with the Second Term Loan Amendment, the Company made a voluntary prepayment of $150 million on the Term Loan Facility funded with incremental borrowings under the ABL Credit Facility that reduces its interest costs. This prepayment will count towards any requirement to prepay the Term Loan Facility from Excess Cash Flow (as defined in the Term Loan Agreement) generated during fiscal 2022, which would be due in fiscal 2023. In connection with this prepayment, the Company incurred a loss on debt extinguishment of $5 million related to unamortized debt issuance costs and a loss on unamortized original issue discount, which was recorded within Interest expense, net in the second quarter of fiscal 2022.

Subsequent to the end of the second quarter of fiscal 2022, in March 2022, the Company made a $44 million voluntary prepayment on the Term Loan Facility from the majority of the anticipated after-tax net proceeds from the transactions described further in Note 16—Subsequent Events.