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Debt
 9 Months Ended
Sep. 28, 2024
Debt Disclosure [Abstract]  
Debt Debt
(dollars in millions)
As of
September 28, 2024
As of
December 30, 2023
Secured debt:
—2024 Dollar Term Loans due June 4, 2031$1,300.0 $— 
—2022 Dollar Term Loans due November 16, 2029564.9 567.8 
—2021 Dollar Term Loans due November 16, 2029— 1,336.1 
—Revolving credit facility30.0 — 
Unsecured debt:
—6.875% Dollar Senior Notes due July 1, 2029
500.0 — 
—6.250% Dollar Senior Notes due January 16, 2026
— 568.0 
Total principal of debt2,394.9 2,471.9 
Deferred issuance costs(34.6)(37.4)
Accrued interest17.4 17.0 
Total carrying value of debt2,377.7 2,451.5 
Debt, current portion36.2 36.5 
Debt, less current portion$2,341.5 $2,415.0 
Gates’ secured debt is jointly and severally, irrevocably and fully and unconditionally guaranteed by certain of its subsidiaries and is secured by liens on substantially all of their assets.
Gates is subject to covenants, representations and warranties under certain of its debt facilities. During the periods covered by these condensed consolidated financial statements, we were in compliance with the applicable financial covenants. Also under the agreements governing our debt facilities, our ability to engage in activities such as incurring certain additional indebtedness, making certain investments and paying certain dividends is dependent, in part, on our ability to satisfy tests based on measures determined under those agreements.
Debt issuances and redemptions
During August 2024, we drew $40.0 million under our revolving credit facility to partially fund the purchase of our ordinary shares under our 2024 share repurchase program, as discussed further in Note 15 below. During September 2024, we partially paid down the borrowings on the revolving credit facility and had a balance of $30.0 million as of September 28, 2024. We had no outstanding borrowings as of December 30, 2023.
On June 4, 2024, we entered into an amendment to our credit agreement governing our term loan facilities and our secured revolving credit facility. As part of this amendment, we issued a new tranche of $1,300.0 million of dollar-denominated term loans (the “2024 Dollar Term Loans”) and used the proceeds to extinguish the entire outstanding principal balance of dollar-denominated term loans of $1,232.6 million, which was issued on February 24, 2021 (the “2021 Dollar Term Loans”), plus $1.1 million of accrued interest. We issued the 2024 Dollar Term Loans with no discount and incurred third party costs totaling approximately $9.5 million, which have been deferred and will be amortized to interest expense over the remaining term of the related borrowings using the effective interest method. The 2024 Dollar Term Loans require a prepayment premium in connection with certain repricing transactions occurring within nine months following the closing of the amendment. The repayment of our 2021 Dollar Term Loans resulted in the accelerated recognition of $11.2 million of deferred issuance costs (recognized in interest expense).
Under the credit agreement amendment, we also repriced our dollar-denominated term loans drawn on November 16, 2022 (the “2022 Dollar Term Loans”), reducing the interest rate spread by 75 basis points from Term SOFR plus 3.00% to Term SOFR plus 2.25%. Third party costs of $0.9 million incurred with the 2022 Dollar Term Loans repricing were recognized in interest expense.
Additionally, in connection with the amendment to our credit agreement, we increased borrowing capacity under our revolving credit facility from $250.0 million to $500.0 million and extended the maturity from November 18, 2026 to the date that is the earliest of (x) June 4, 2029 and (y) April 1, 2029, if greater than $500.0 million in aggregate principal amount of the 2024 Unsecured Notes (as defined below) are outstanding. We incurred associated third party costs of approximately $2.5 million, which have been deferred and will be amortized to interest expense over the remaining term of the revolving credit facility. Concurrently with this amendment, we terminated the $250.0 million asset-backed revolving credit facility governed by the second amended and restated credit agreement dated as of November 18, 2021. The termination of our asset-backed revolving credit facility resulted in the accelerated recognition of $1.0 million of deferred issuance costs (recognized in interest expense).
On June 4, 2024, we also issued new unsecured senior notes of $500.0 million (the “2024 Unsecured Senior Notes”), and fully redeemed our existing unsecured senior notes due 2026 of $568.0 million aggregate principal amount (the “2019 Unsecured Senior Notes”), which included the payment of $13.7 million of accrued interest thereon. We issued the 2024 Unsecured Senior Notes with no discount and incurred third party costs of approximately $7.6 million, which have been deferred and will be amortized to interest expense over the remaining term of the 2024 Unsecured Senior Notes using the effective interest method. The redemption of our 2019 Unsecured Senior Notes resulted in the accelerated recognition of $2.6 million of deferred issuance costs (recognized in interest expense).
During February 2024, we made a voluntary principal debt repayment of $100.0 million against our 2021 Dollar Term Loans. As a result of this repayment, we accelerated the recognition of $1.0 million of deferred issuance costs (recognized in interest expense).
During May 2023, we drew $100.0 million under our former asset-backed revolving credit facility to partially fund the purchase of shares under our 2023 share repurchase program. During fiscal year 2023 we paid down the borrowings on the asset-backed revolver and had no outstanding borrowings as of September 28, 2024 and December 30, 2023. As of December 30, 2023, the letters of credit outstanding under this facility were $29.7 million. As discussed above, this facility was terminated on June 4, 2024.
Dollar Term Loans
Our secured credit facilities consist of two loans, which include the 2024 Dollar Term Loans and the 2022 Dollar Term Loans described above. These term loan facilities bear interest at a floating rate, at our option, at either a base rate as defined in the credit agreement plus an applicable margin, or Term SOFR plus an applicable margin.
The 2024 Dollar Term Loans’ interest rate is currently Term SOFR, subject to a floor of 0.50%, plus a margin of 2.25%, and as of September 28, 2024, borrowings under this facility bore interest at a rate of 7.50% per annum. The interest rate is currently re-set on the last business day of each month based on the election of one month interest periods. The 2024 Dollar Term Loans mature on June 4, 2031.
The 2022 Dollar Term Loans’ interest rate as of September 28, 2024 was Term SOFR, subject to a floor of 0.50%, plus a margin of 2.25%, and as of September 28, 2024, borrowings under this facility bore interest at a rate of 7.50% per annum. The 2022 Dollar Term Loans’ interest rate is currently re-set on the last business day of each month based on the election of one month interest periods. The 2022 Dollar Term Loans mature on November 16, 2029.
The 2022 Dollar Term Loans and the 2024 Dollar Term Loans are subject to quarterly amortization payments of 0.25%, based on the original principal amount less certain repayments with the balance payable on maturity. During the nine months ended September 28, 2024, we made amortization payments against the 2021 Dollar Term Loans, the 2024 Dollar Term Loans and the 2022 Dollar Term Loans of $3.4 million, $0.0 million and $2.9 million, respectively.
Under the terms of the credit agreement, we are obliged to offer annually to the term loan lenders an “excess cash flow” amount as defined under the credit agreement, based on the preceding year’s final results. Based on our 2023 results, the leverage ratio as defined under the credit agreement was below the threshold above which payments are required, and therefore no excess cash flow payment is required to be made in 2024.
Gates Corporation, a wholly-owned U.S. subsidiary of Gates Industrial Holdco Limited (the parent guarantor and direct subsidiary of Gates Industrial Corporation plc), is the principal obligor under the term loans for U.S. federal income tax purposes and makes the payments due on the term loans. As a result, interest received by lenders of this tranche of debt is U.S. source income.
2024 Unsecured Senior Notes
As of September 28, 2024, we had $500.0 million of 2024 Senior Notes outstanding that were issued on June 4, 2024. The 2024 Unsecured Senior Notes are scheduled to mature on July 1, 2029 and bear interest at an annual fixed rate of 6.875% with semi-annual interest payments.
Prior to July 1, 2026, we may redeem the 2024 Unsecured Senior Notes, at our option, in whole at any time or in part from time to time, at a “make-whole” redemption price. In addition, on or subsequent to July 1, 2026, we may redeem the 2024 Unsecured Senior Notes, at our option, in whole at any time or in part from time to time, at the following redemption prices (expressed as a percentage of the principal amount), plus accrued and unpaid interest to the redemption date:
Redemption price
On or subsequent to:
—July 1, 2026103.438 %
—July 1, 2027101.719 %
—July 1, 2028 and thereafter100.000 %
Additionally, net cash proceeds from an equity offering can be utilized at any time prior to July 1. 2026, to redeem up to 40% of the 2024 Unsecured Senior Notes at a redemption price equal to 106.875% of the principal amount thereof, plus accrued and unpaid interest through to the redemption date.
Upon the occurrence of specified types of change of control or of certain qualifying asset sales, the holders of the 2024 Unsecured Senior Notes will have the right to require us to make an offer to repurchase each holder's notes at a price equal to 101% (in the case of a change of control offer) or 100% (in the case of an asset sale offer) of their principal amount, plus accrued and unpaid interest.
As noted above, on June 4, 2024, we redeemed all $568.0 million in aggregate principal amount of our 2019 Unsecured Senior Notes.
Revolving credit facility
We have a secured revolving credit facility that provides for multi-currency revolving loans. On June 4, 2024, we amended the credit agreement governing this facility to increase the size of the facility from $250.0 million to $500.0 million, and extended the maturity date from November 18, 2026 to the date that is the earliest of (x) June 4, 2029 and (y) April 1, 2029, if greater than $500.0 million in aggregate principal amount of the 2024 Unsecured Senior Notes are outstanding. This facility also includes a letter of credit sub-facility of $150.0 million.
As of September 28, 2024, we had a balance of $30.0 million under the revolving credit facility following a draw in August 2024 to facilitate the share repurchase transactions discussed further in Note 15. As of December 30, 2023, there were no drawings for cash under the revolving credit facility. The letters of credit outstanding under this facility were $28.8 million and $0.0 million as of September 28, 2024 and December 30, 2023, respectively.
Debt under the revolving credit facility bears interest at a floating rate, at our option, at either a base rate as defined in the credit agreement plus an applicable margin or the reference rate plus an applicable margin.
In addition, Gates had other outstanding performance bonds, letters of credit and bank guarantees amounting to $8.6 million as of September 28, 2024, compared to $8.4 million as of December 30, 2023.