9. Debt

USI is a holding company and, as a result, its primary sources of funds are cash generated from operating activities of its direct operating subsidiary, USSC, and from borrowings by USSC. The 2013 Credit Agreement (as defined below), the 2013 Note Purchase Agreement (as defined below), the 2007 Credit Agreement (as defined below), the 2007 Note Purchase Agreement (as defined below) and the Receivables Securitization Program (as defined below) contain restrictions on the use of cash transferred from USSC to USI.

Debt consisted of the following amounts (in millions):


	As of December 31, 2013		As of December 31, 2012
2013 Credit Agreement	$	206.8	$	238.1
2007 Master Note Purchase Agreement (Private Placement)		135.0		135.0
Receivables Securitization Program		190.7		150.0
Mortgage & Capital Lease		1.2		1.3

Total	$	533.7	$	524.4

As part of the acquisition of OKI in 2012 the Company acquired a capital lease related to a computer server which terminates in 2015, as well as a mortgage on the headquarters of the Canadian subsidiary which matures in 2015 as it was renewed in January 2014. As of December 31, 2013, 100% of the Company’s outstanding debt, excluding capital leases, is priced at variable interest rates based primarily on the applicable bank prime rate or London InterBank Offered Rate (“LIBOR”). As of December 31, 2013 the overall weighted average effective borrowing rate of the Company’s debt was 1.3%. At December 31, 2013 all of the Company’s debt was unhedged and a 50 basis point movement in interest rates would result in a $2.7 million change in annualized interest expense, on a pre-tax basis, and upon cash flows from operations.

Receivables Securitization Program

On January 18, 2013, the Company’s accounts receivable securitization program (“Receivables Securitization Program” or the “Program”) was amended and restated to increase the maximum amount of financing from $150 million to $200 million and to extend the term of the Program through January 18, 2016. The parties to the Program are USI, USSC, United Stationers Financial Services (“USFS”), United Stationers Receivables, LLC (“USR”), and PNC Bank, National Association and the Bank of Toyko—Mitsubishi UFJ, Ltd New York Branch (the “Investors”). The Program is governed by the following agreements:

•

The Amended and Restated Transfer and Administration Agreement among USSC, USFS, USR, and the Investors;

•

The Receivables Sale Agreement between USSC and USFS;

•

The Receivables Purchase Agreement between USFS and USR; and

•

The Performance Guaranty executed by USI in favor of USR.

Pursuant to the Receivables Sale Agreement, USSC sells to USFS, on an on-going basis, all the customer accounts receivable and related rights originated by USSC. Pursuant to the Receivables Purchase Agreement, USFS sells to USR, on an on-going basis, all the accounts receivable and related rights purchased from USSC. Pursuant to the Amended and Restated Transfer and Administration Agreement, USR then sells the receivables and related rights to the Investors. The Program provides for maximum funding available of the lesser of $200 million or the total amount of eligible receivables less excess concentrations and applicable reserves. USFS retains servicing responsibility over the receivables. USR is a wholly-owned, bankruptcy remote special purpose subsidiary of USFS. The assets of USR are not available to satisfy the creditors of any other person, including USFS, USSC or USI, until all amounts outstanding under the Program are repaid and the Program has been terminated.

The receivables sold to the Investors remain on USI’s Consolidated Balance Sheets, and amounts advanced to USR by the Investor or any successor Investors are recorded as debt on USI’s Consolidated Balance Sheets. The cost of such debt is recorded as interest expense on USI’s Consolidated Statements of Income. As of December 31, 2013 and December 31, 2012, $355.4 million and $400.2 million, respectively, of receivables had been sold to the Investors. As of December 31, 2013, USR had $190.7 million outstanding under the Program. As of December 31, 2012, USR had $150.0 million outstanding under the Program.

Credit Agreement and Other Debt

On October 15, 2007, USI and USSC entered into a Master Note Purchase Agreement (the “2007 Note Purchase Agreement”) with several purchasers. The 2007 Note Purchase Agreement allows USSC to issue up to $1 billion of senior secured notes, subject to certain debt restrictions. Pursuant to the 2007 Note Purchase Agreement, USSC issued and sold $135 million of floating rate senior secured notes due October 15, 2014 at par in a private placement (the “Series 2007-A Notes”). Interest on the Series 2007-A Notes is payable quarterly in arrears at a rate per annum equal to three-month LIBOR plus 1.30%, beginning January 15, 2008. USSC may issue additional series of senior secured notes from time to time under the 2007 Note Purchase Agreement but has no specific plans to do so at this time.

On November 25, 2013, USI and USSC, entered into a Note Purchase Agreement (the “2013 Note Purchase Agreement”) with the note purchasers identified therein (collectively, the “Note Purchasers”). Pursuant to the 2013 Note Purchase Agreement, USSC will issue and the Note Purchasers will purchase an aggregate of $150 million of senior secured notes due January 15, 2021 (the “2014 Notes”). The issuance of the 2014 Notes occurred on January 15, 2014, subject to customary closing conditions. USSC used the proceeds from the sale of the 2014 Notes to repay the Series 2007-A Notes and to reduce borrowings under the 2013 Credit Agreement. Interest on the 2014 Notes will be payable semi-annually at a rate per annum equal to 3.75%. At the time USSC priced the 2014 Notes, USSC terminated the June 2013 Swap Transaction (as described in Note 18 “Derivative Financial Instruments”). After giving effect to the impact of terminating the June 2013 Swap Transaction, the effective per annum interest rate on the 2014 Notes will be 3.66%. The full principal amount of the 2014 Notes matures on January 15, 2021. If USSC elects to prepay some or all of the 2014 Notes prior to January 15, 2021, USSC will be obligated to pay a Make-Whole Amount calculated as set forth in the Agreement.

On September 21, 2011, USI and USSC entered into a Third Amended and Restated Five-Year Revolving Credit Agreement (the “2011 Credit Agreement”) with U.S. Bank National Association and Wells Fargo Bank, National Association as Syndication Agents; Bank of America, N.A. and PNC Bank, National Association, as Documentation Agents; JPMorgan Chase Bank, National Association, as Administrative Agent, and the lenders identified therein. The 2011 Credit Agreement amends and restates the Second Amended and Restated Five-Year Revolving Credit Agreement with PNC Bank, National Association and U.S. Bank National Association, as Syndication Agents, KeyBank National Association and LaSalle Bank, National Association, as Documentation Agents, and JPMorgan Chase Bank, National Association, as Agent (as amended on December 21, 2007, the “2007 Credit Agreement”). On July 8, 2013, the Company and USSC entered into a Fourth Amended and Restated Five-Year Revolving Credit Agreement (the “2013 Credit Agreement”) with JPMorgan Chase Bank, National Association, as Agent, and the lenders identified therein. The 2013 Credit Agreement amended and restated the 2011 Credit Agreement and extended the maturity date of the loan agreement to July 6, 2018.

The 2013 Credit Agreement provides for a revolving credit facility with an aggregate committed principal amount of $700 million. The 2013 Credit Agreement also provides for the issuance of letters of credit. The Company had outstanding letters of credit of $11.1 million under the 2013 Credit Agreement as of December 31, 2013 and $9.4 million under the 2011 Credit Agreement as of December 31, 2012. Subject to the terms and conditions of the 2013 Credit Agreement, USSC may seek additional commitments to increase the aggregate committed principal amount to a total amount of $1.05 billion.

Borrowings under the 2013 Credit Agreement will bear interest at LIBOR for specified interest periods or at the Alternate Base Rate (as defined in the 2013 Credit Agreement), plus, in each case, a margin determined based on the Company’s permitted debt to EBITDA ratio calculated as provided in Section 6.20 of the 2013 Credit Agreement (the “Leverage Ratio”). Depending on the Company’s Leverage Ratio, the margin on LIBOR-based loans ranges from 1.00% to 2.00% and on Alternate Base Rate loans ranges from 0.00% to 1.00%. As of December 31, 2013, the applicable margin for LIBOR-based loans was 1.25% and for Alternate Base Rate loans was 0.25%. In addition, USSC is required to pay the lenders a fee on the unutilized portion of the commitments under the 2013 Credit Agreement at a rate per annum between 0.15% and 0.35%, depending on the Company’s Leverage Ratio.

Subject to the terms and conditions of the 2013 Credit Agreement, USSC is permitted to incur up to $300 million of indebtedness in addition to borrowings under the 2013 Credit Agreement ($15 million of which the Company intends to utilize in connection with the sale of the 2014 Notes described above), plus up to $200 million under the Company’s Receivables Securitization Program and up to $135 million in replacement or refinancing of the 2013 Note Purchase Agreement.

USSC has entered into several interest rate swap transactions to mitigate its floating rate risk on a portion of its total long-term debt. See Note 18, “Derivative Financial Instruments”, for further details on these swap transactions and their accounting treatment.

Obligations of USSC under the 2013 Credit Agreement and the 2007 Note Purchase Agreement are guaranteed by USI and certain of USSC’s domestic subsidiaries. USSC’s obligations under these agreements and the guarantors’ obligations under the guaranties are secured by liens on substantially all Company assets other than real property and certain accounts receivable already collateralized as part of the Receivables Securitization Program.

The 2013 Credit Agreement, the 2013 Note Purchase Agreement and the Amended and Restated Transfer and Administration Agreement prohibit the Company from exceeding a Leverage Ratio of 3.50 to 1.00 (4.00 to 1.00 for the first four fiscal quarters following certain acquisitions). The 2013 Credit Agreement and the 2013 Note Purchase Agreement also impose limits on the Company’s ability to repurchase stock and issue dividends when the Leverage Ratio is greater than 3.00 to 1.00.

The 2013 Credit Agreement, the 2013 Note Purchase Agreement and the Amended and Restated Transfer and Administration Agreement contain additional representations and warranties, covenants and events of default that are customary for facilities of these types of agreements. The 2013 Credit Agreement, 2007 Note Purchase Agreement, and the Transfer and Administration Agreement all contain cross-default provisions. As a result, if a termination event occurs under any of those agreements, the lenders under all of the agreements may cease to make additional loans, accelerate any loans then outstanding and/or terminate the agreements to which they are party. Debt maturities as of December 31, 2013, were as follows (in millions):


Year	Amount
2014⁽¹⁾	$	135.3
2015		0.9
2016		190.7
2017		—
Thereafter		206.8

Total	$	533.7

(1)	The 2007 Note Purchase Agreement was repaid in January 2014 with a portion of the proceeds from the 2014 Notes.