Debt Obligations

12 Months Ended

Jan. 31, 2020

Debt Obligations:

The Company’s long-term debt as of the periods presented was as follows:



	January 31, 2020											February 1, 2019
	Stated interest rate		Effective interest rate		Principal		Unamortized Debt Issuance Costs			Net		Principal		Unamortized Debt Issuance Costs			Net
					(in millions)
Term Loan A Facility due October 2023	3.15	%	3.48	%	$	904	$	(9	)	$	895	$	1,068	$	(14	)	$	1,054
Term Loan B Facility due October 2025	3.40	%	3.60	%	1,037		(11		)	1,026		1,047		(12		)	1,035
Total long-term debt					$	1,941	$	(20	)	$	1,921	$	2,115	$	(26	)	$	2,089
Less current portion					70		—			70		24		—			24
Total long-term debt, net of current portion					$	1,871	$	(20	)	$	1,851	$	2,091	$	(26	)	$	2,065

As of January 31, 2020, the Company has a $2.3 billion credit facility (the Credit Facility) consisting of a $400 million secured Revolving Credit Facility due October 2023, a $904 million secured Term Loan A Facility due October 2023, and a $1,037 million secured Term Loan B Facility due October 2025 (together, the Term Loan Facilities). During the second quarter of fiscal 2020, the Company borrowed $100 million under the Revolving Credit Facility, which was repaid in full during the third quarter of fiscal 2020. The Revolving Credit Facility is available to the Company through October 2023 and there is no balance outstanding as of January 31, 2020. Any obligations under the Credit Facility are secured by liens on substantially all of the assets of the Company and its subsidiaries.

As of February 1, 2019, the Company had a $2.5 billion credit facility consisting of a $400 million secured Revolving Credit Facility due October 2023, a $1,068 million secured Term Loan A Facility due October 2023, and a $1,047 million secured Term Loan B Facility due October 2025.

As of February 2, 2018, the Company had a $1.2 billion credit facility consisting of a $200 million secured Revolving Credit Facility due August 2021, a $635 million secured Term Loan A Facility due August 2021, and a $400 million secured Term Loan B Facility due May 2022 under the First Amendment to the Second Amended and Restated Credit Agreement (First Amendment).

On February 7, 2018, the Company executed the Second Amendment to the Second Amended and Restated Credit Agreement (Second Amendment) reducing the interest rate margins by 0.25%, 0.50%, and 0.25%, across all leverage ratios for the Term Loan A Facility due August 2021, the Term Loan B Facility due May 2022, and the Revolving Credit Facility due August 2021, respectively. Effective upon execution of the Second Amendment, the applicable margin with respect to the Term Loan A Facility due August 2021 and borrowings under the Revolving Credit Facility due August 2021 ranged from 1.25% to 2.00% for Eurocurrency Rate loans, and 0.25% to 1.00% for Base Rate loans. Under the Second Amendment, interest rate margins for the Term Loan B Facility due May 2022 were 2.00%, subject to a 0.75% floor for Eurocurrency Rate loans, or 1.00% for Base Rate loans. The Company incurred and paid $2 million in fees associated with the Second Amendment, including $1 million of deferred financing fees.

On October 31, 2018, the Company entered into the Third Amended and Restated Credit Agreement (Third Amended Credit Agreement) in anticipation of the acquisition of Engility (see Note 4). The Third Amended Credit Agreement, among other things, provided for and permitted: 1) the acquisition of Engility; 2) the establishment of a senior secured Term Loan B Facility due October 2025 in the amount of $1.1 billion; 3) the establishment of a senior secured Term Loan A Facility Commitment due October 2023 in the amount of $1.1 billion; 4) an increase to the existing $200 million Revolving Credit Facility by an additional $200 million upon the effectiveness of the acquisition of Engility; and, 5) an extension to the term of the Revolving Credit Facility to October 2023.

The Term Loan B Facility due October 2025 was funded in full in October 2018 and the proceeds were used to repay all indebtedness outstanding under the Second Amendment and related expenses.

On January 14, 2019, in connection with the acquisition of Engility, the Company funded the Term Loan A Facility in the amount of $1.1 billion and increased the existing Revolving Credit Facility to $400 million. The proceeds were used to partially finance the acquisition of Engility and for general corporate purposes.

The Company incurred $31 million of debt issue costs associated with the Third Amended Credit Agreement. The Company recognized $5 million in expenses associated with the Third Amended Credit Agreement, which is included in interest expense and includes a $4 million loss on extinguishment of debt. The Company deferred $26 million in financing fees that are amortized to interest expense utilizing the effective interest method.

Borrowings under the Term Loan A Facility due October 2023 amortize quarterly beginning on January 31, 2020 at 1.25% of the original borrowed amount thereunder, with such quarterly amortization payments increasing to 1.875% on January 31, 2021 and then to 2.50% on January 31, 2022. Beginning January 31, 2019, The Term Loan B Facility due October 2025 amortizes quarterly at 0.25% of the original borrowed amount.

Beginning in fiscal year 2020, the scheduled principal repayments for the Term Loan A and Term Loan B facilities may be further reduced or eliminated by annual mandatory prepayments of a portion of SAIC’s Excess Cash Flow (as defined in the Third Amended Credit Agreement). Mandatory principal prepayments are allocated to Term Loan A and Term Loan B facilities on a pro rata basis and reduce the remaining scheduled principal installments for each facility. Voluntary principal prepayments may be applied to either or both loans at the Company’s direction. During fiscal year 2020, the Company made $150 million of voluntary principal prepayments on the Term Loan A Facility due October 2023.

Borrowings under the Third Amended Credit Agreement bear interest at a variable rate of interest based on LIBOR or a Base Rate, plus in each case an applicable margin. Applicable margins with respect to borrowings under the Term Loan B Facility due October 2025 are 1.75% for LIBOR loans and 0.75% for Base Rate loans. Applicable margins with respect to borrowings under the Term Loan A Facility due October 2023 and the Revolving Credit Facility due October 2023 range from 1.25% to 2.00% for LIBOR loans and 0.25% to 1.00% for Base Rate loans, in each case based on the then applicable Leverage Ratio (as defined in the Third Amended Credit Agreement). The Company also pays a commitment fee with respect to undrawn amounts under the Revolving Credit Facility due October 2023 ranging from 0.20% to 0.35%.

The Third Amended Credit Agreement contains certain restrictive covenants applicable to the Company and its subsidiaries including a requirement to maintain a Senior Secured Leverage Ratio (as defined in the Third Amended Credit Agreement) of not greater than 3.75 to 1.00 until the effectiveness of the acquisition of Engility, not greater than 4.50 to 1.00 upon the effectiveness of the acquisition and for the succeeding six fiscal quarters, and not greater than 4.00 to 1.00 thereafter, unless a Permitted Acquisition (as defined in the Third Amended Credit Agreement) occurs in which case not greater than 4.25 to 1.00 for three consecutive quarters following such a transaction. As of January 31, 2020, the Company was in compliance with the covenants under the Third Amended Credit Agreement.

Maturities of long-term debt as of January 31, 2020 are:



Fiscal Year Ending	Total
	(in millions)
2021	$	70
2022	68
2023	147
2024	662
2025	10
Thereafter	984
Total principal payments	$	1,941

As of January 31, 2020 and February 1, 2019, the carrying value of the Company’s outstanding debt obligations approximated its fair value. The fair value of long-term debt is calculated using Level 2 inputs, based on interest rates available for debt with terms and maturities similar to the Company’s Term Loan Facilities.