LONG-TERM DEBT

12 Months Ended

Jul. 30, 2022

Debt Disclosure [Abstract]

LONG-TERM DEBT

NOTE 9—LONG-TERM DEBT

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

(in millions)	Average Interest Rate at July 30, 2022	Fiscal Maturity Year	July 30, 2022		July 31, 2021
Term Loan Facility	5.69%	2026	$	800	$	1,002
ABL Credit Facility	3.55%	2027	840		701
Senior Notes	6.75%	2029	500		500
Other secured loans	5.09%	2024-2025	23		37
Debt issuance costs, net			(29)		(35)
Original issue discount on debt			(11)		(17)
Long-term debt, including current portion			2,123		2,188
Less: current portion of long-term debt			(14)		(13)
Long-term debt			$	2,109	$	2,175

Future maturities of long-term debt, excluding debt issuance costs and original issue and purchase accounting discounts on debt, and contractual interest payments based on the face value and applicable interest rate as of July 30, 2022, consist of the following (in millions):

Fiscal Year	Long-term debt maturity		Interest on long-term debt
2023	$	14	$	107
2024	8		115
2025	1		110
2026	800		74
2027	840		59
2028 and thereafter	500		51
	$	2,163	$	516

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 or the Term Loan Facility (defined below).

ABL Credit Facility

On June 3, 2022, the Company entered into a new loan agreement (the “ABL Loan Agreement”), by and among the Company (the “2022 U.S. Borrower”) and UNFI Canada. (the “2022 Canadian Borrower” and, together with the 2022 U.S. Borrower, the “2022 Borrowers”), and the financial institutions that are parties thereto as lenders (collectively, the “2022 ABL Lenders”), Wells Fargo Bank, N.A. as administrative agent for the 2022 ABL Lenders, and the other parties thereto, which provides for a secured asset-based revolving credit facility (the “ABL Credit Facility”), of which up to $2,600 million is available to the 2022 Borrowers, including a U.S. Dollar equivalent of $100 million sublimit for borrowings in Canadian dollars. The ABL Credit Facility replaced the Company’s existing $2,100 million ABL credit facility. Under the new ABL Loan Agreement, the 2022 Borrowers may, at their option, increase the aggregate amount of the ABL Credit Facility in an amount of up to $750 million without the consent of any 2022 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. Effective June 3, 2022, the Company used borrowings under the ABL Loan Agreement to repay all amounts outstanding under the existing $2,100 million ABL credit facility and terminated the existing ABL credit facility.

The ABL Loan Agreement utilizes Term SOFR and Prime rates as the benchmark interest rates. Borrowings under the ABL Credit Facility bear interest at rates that, at the 2022 Borrowers’ option, can be either: (i) a base rate plus a 0.00% - 0.25% margin or (ii) a Term SOFR rate plus a 1.00% - 1.25% margin. Unutilized commitments under the ABL Credit Facility are subject to a per annum fee of 0.20%. The ABL Credit Facility will expire at the earlier of (i) June 3, 2027, and (ii) the date that is 90 days prior to the maturity date of the Term Loan Facility (defined below) if on such date more than $100 million of borrowings under the Term Loan Facility remain outstanding and mature prior to June 3, 2027. The ABL Loan Agreement subjects the Company to a fixed charge coverage ratio of at least 1.0 to 1.0 calculated at the end of each of the Company’s fiscal quarters on a rolling four quarter basis, if the adjusted aggregate availability is ever less than the greater of (i) $210 million and (ii) 10% of the aggregate Borrowing Base (as defined below).

The ABL Loan Agreement contains certain operational and informational covenants customary for this type of secured revolving credit facility, which limit the Company’s and its restricted subsidiaries’ ability to, among other things, incur debt, declare or pay dividends or make other distributions to its stockholders, transfer or sell assets, create liens on our assets, engage in transactions with affiliates and merge, consolidate or sell all or substantially all of the Company’s and its subsidiaries’ assets on a consolidated basis. If the Company fails to comply with any of these covenants, it may be in default under the applicable debt agreement, and all amounts due thereunder may become immediately due and payable.

The 2022 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 2022 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 2022 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 2022 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% - 92.5% of the net orderly liquidation value of eligible inventory, plus 90% of eligible pharmacy receivables, plus certain pharmacy prescription files availability to 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 $2,600 million) or the Borrowing Base.

The assets included in the Consolidated Balance Sheets securing the outstanding obligations under the 2022 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):	July 30, 2022		July 31, 2021
Certain inventory assets included in Inventories, net and Current assets of discontinued operations	$	1,789	$	2,297
Certain receivables included in Accounts receivable, net and Current assets of discontinued operations	$	878	$	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 Consolidated Balance Sheets. Refer to Note 6—Goodwill and Intangible Assets, Net for additional information.

As of July 30, 2022, the Borrowers’ Borrowing Base, net of $120 million of reserves, was $2,612 million, which is above the $2,600 million limit of availability, resulting in total availability of $2,600 million for loans and letters of credit under the ABL Credit Facility. As of July 30, 2022, the Borrowers had $840 million of loans outstanding under the ABL Credit Facility, which are presented net of debt issuance costs of $10 million and are included in Long-term debt on the Consolidated Balance Sheets. As of July 30, 2022, the Borrowers had $133 million in letters of credit outstanding under the ABL Credit Facility. The Company’s resulting remaining availability under the ABL Credit Facility was $1,627 million as of July 30, 2022.

Availability under the ABL Credit Facility (in millions):	July 30, 2022
Total availability for ABL loans and letters of credit	$	2,600
ABL loans	$	840
Letters of credit	$	133
Unused credit	$	1,627

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)	July 30, 2022
2022 Borrowers’ applicable margin for base rate loans	0.00% - 0.25%	0.00	%
2022 Borrowers’ applicable margin for SOFR and BA loans(1)	1.00% - 1.25%	1.00	%
Unutilized commitment fees	0.20%	0.20	%
Letter of credit fees	1.125% - 1.375%	1.125	%

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

Term Loan Facility

The term loan agreement (“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 (the “Term Lenders”), provides for senior secured first lien term loans in an initial aggregate principal amount of $1,950 million, primarily consisting of a $1,800 million seven-year tranche (the “Term Loan Facility”). The entire amount of the net proceeds from the Term Loan Facility, which included a $150 million 364-day tranche that was repaid in fiscal 2020, was used to finance the Supervalu acquisition and related transaction costs. 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 July 30, 2022 and July 31, 2021, there was $629 million and $676 million, respectively, of owned real property pledged as collateral that was included in Property and equipment, net in the 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 2022, no prepayment from Excess Cash Flow in fiscal 2022 is required to be made in fiscal 2023.

As of July 30, 2022, the Company had borrowings of $800 million outstanding under the Term Loan Facility, which are presented in the Consolidated Balance Sheets net of debt issuance costs of $12 million and an original issue discount on debt of $11 million. As of July 30, 2022, no amount of the Term Loan Facility was classified as current.

As of July 30, 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 SOFR rate plus a margin of 3.25%; provided that the SOFR rate shall never be less than 0.0%.

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 then outstanding ABL Credit Facility that reduced its interest costs. 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. On March 1, 2022, the Company made a $44 million voluntary prepayment on the Term Loan Facility from the majority of the after-tax net proceeds from the sale-leaseback of an acquired distribution center that was previously leased.

On June 3, 2022, the Company entered into an amendment (the “Third Term Loan Amendment”) to the Term Loan Agreement to amend the reference rate thereunder from LIBOR to Term SOFR. There were no other changes to the Term Loan Agreement as a result of the Third Term Loan Amendment. The Company did not record any gains or losses on the conversion of the reference rate for Borrowings under the Term Loan Agreement from LIBOR to SOFR.