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Note 4 - Long-term Debt
12 Months Ended
Dec. 31, 2023
Notes to Financial Statements  
Debt Disclosure [Text Block]

4.

Long-term Debt

 

As of December 31, 2023 and 2022, long-term debt consisted of obligations under our 2019 Senior Credit Facility (as defined below), our 5.875% senior notes due 2026 (the “2026 Notes”), our 7.0% senior notes due 2027 (the “2027 Notes”), our 4.75% senior notes due 2030 (the “2030 Notes”) and our 5.375% senior notes due 2031 (the “2031 Notes”) as follows (in millions):

 

  

December 31,

 
  

2023

  

2022

 

Long-term debt:

        

2019 Senior Credit Facility:

        

2017 Term Loan (matures February 7, 2024)

 $-  $295 

2019 Term Loan (matures January 2, 2026)

  1,190   1,190 

2021 Term Loan (matures December 1, 2028)

  1,470   1,485 

2026 Notes (matures July 15, 2026)

  700   700 

2027 Notes (matures May 15, 2027)

  750   750 

2030 Notes (matures October 15, 2030)

  800   800 

2031 Notes (matures November 15, 2031)

  1,300   1,300 

Total outstanding principal

  6,210   6,520 

Unamortized deferred loan costs - 2017 Term Loan

  -   (4)

Unamortized deferred loan costs - 2019 Term Loan

  (14)  (21)

Unamortized deferred loan costs - 2021 Term Loan

  (4)  (4)

Unamortized deferred loan costs - 2026 Notes

  (3)  (4)

Unamortized deferred loan costs - 2027 Notes

  (6)  (7)

Unamortized deferred loan costs - 2030 Notes

  (10)  (11)

Unamortized deferred loan costs - 2031 Notes

  (14)  (16)

Unamortized premium - 2026 Notes

  1   2 

Less current portion

  (15)  (15)

Long-term debt, less deferred financing costs

 $6,145  $6,440 
         

Borrowing availability under Revolving Credit Facility

 $494  $496 

 

Borrowings under the Revolving Credit Facility bear interest, at our option, at either the SOFR rate or the Base Rate, in each case, plus an applicable margin. Because of their relationship to the interest rate caps, described below, borrowings under the 2021 Term Loan and 2019 Term Loan bear interest at the 1-month SOFR rate, plus applicable margin. As of December 31, 2023, the interest rate on the balance outstanding under the 2021 Term Loan and the 2019 Term Loan were 8.5% and 8.0%, respectively. A portion of the Revolving Credit Facility matures on January 2, 2026, with the remainder maturing on December 1, 2026.

 

Interest Rate Caps. On February 23, 2023, we entered into two interest rate caps pursuant to an International Swaps and Derivatives Association ("ISDA") Master Agreement with two counterparties, Wells Fargo Bank, NA and Truist Bank, respectively. At December 31, 2023, the caps have a combined notional value of approximately $2.6 billion and mature on December 31, 2025. At inception, the interest rate caps protect us against adverse fluctuations in interest rates by reducing our exposure to variability in cash flows on a portion of our variable-rate debt. We designated the interest rate caps as cash flow hedges of our risk of changes in our cash flows attributable to changes in 1-month LIBOR above 5% on our outstanding variable-rate debt in accordance with ASC 815. On March 29, 2023, in conjunction with the amended credit facility, we transitioned the contractually specified rate on the interest rate caps from 1-month LIBOR to 1-month Term SOFR. Effective with the amended interest rate caps, we are hedging variability in cash flows related to future interest payments when SOFR exceeds the caps of 4.97% and 5.015%. We elected to apply the optional expedient in ASC 848, Reference Rate Reform, in connection with transitioning its interest rate caps from LIBOR to Term SOFR that enabled us to consider the new swaps a continuation of the existing contracts. As a result, the transition did not have an impact on our hedge accounting or a material impact to our financial statements.

 

The interest rate caps, as amended, effectively limit the annual interest charged on our 2021 Term Loan and our 2019 Term Loan to a maximum of 1-month Term SOFR of 4.97% and 5.015%. We are required to pay aggregate fees in connection with the interest rate caps of approximately $34 million that is due and payable at maturity on December 31, 2025. On the initial designation date, we recognized an asset and corresponding liability for the deferred premium payable equal to $34 million. The asset is amortized into interest expense straight-line over the term of the hedging relationship. The recorded value of the asset was $24 million, net of accumulated amortization, at December 31, 2023. At December 31, 2023, the fair value of the derivative liability was $23 million. We present the deferred premium, the asset, and the fair value of the derivative, net within other non-current liabilities in our consolidated balance sheets.

 

The ISDA Master Agreement, together with its related schedules, contain customary representations, warranties and covenants. The interest rate caps were not entered into for speculative trading purposes. Changes in the fair value of the interest rate caps are reported as a component of other comprehensive income. Actual gains and losses are reclassified into earnings in the same period or periods during which the hedged transaction affects earnings and are presented in the same income statement line item as the earnings effect of the hedged transaction. Gains and losses on the derivative instrument representing hedge components excluded from the assessment of effectiveness are recognized currently in earnings and are presented in the same line of the income statement for the hedged item. We recognized $10 million of amortization expense for the asset during the year ended December 31, 2023, which is included as a component of cash flows from operating activities in our consolidated statement of cash flows. Cash flows received from the counterparties pursuant to the interest rate caps are included as components of cash flows from financing activities in our consolidated statements of cash flows. Prior to the amended hedge designation date, LIBOR was less than 5%. Further, SOFR was greater than 4.97% and 5.015% from the amended designation date of the hedging relationship through December 31, 2023; therefore, we received $4 million of cash payments from the counterparties that we reclassify to reduce interest expense from the interest rate caps in our consolidated statement of operations.

 

For all of our interest bearing obligations, we made interest payments of approximately $419 million, $339 million and $178 million during the years ended December 31, 2023, 2022 and 2021, respectively. During the years ended December 31, 2023 and 2022, we capitalized $20 million and $9 million of interest payments, respectively, related to the Assembly Atlanta project. We did not capitalize any interest payments during the year ended December 31, 2021.

 

As of December 31, 2023, the aggregate minimum principal maturities of our long-term debt were as follows (in millions):

 

  

Minimum Principal Maturities

 
  

2019 Senior

  

2026

  

2027

  

2030

  

2031

     

Year

 

Credit Facility

  

Notes

  

Notes

  

Notes

  

Notes

  

Total

 

2024

 $15  $-  $-  $-  $-  $15 

2025

  15   -   -   -   -   15 

2026

  1,205   700   -   -   -   1,905 

2027

  15   -   750   -   -   765 

2028

  1,410   -   -   -   -   1,410 

Thereafter

  -   -   -   800   1,300   2,100 

Total

 $2,660  $700  $750  $800  $1,300  $6,210 

 

Collateral, Covenants and Restrictions. Our obligations under the 2019 Senior Credit Facility are secured by substantially all of our consolidated assets, excluding real estate. In addition, substantially all of our subsidiaries are joint and several guarantors of, and our ownership interests in those subsidiaries are pledged to collateralize, our obligations under the 2019 Senior Credit Facility. Gray Television, Inc. is a holding company, and has no material independent assets or operations. For all applicable periods, the 2026 Notes, 2027 Notes, 2030 Notes and 2031 Notes have been fully and unconditionally guaranteed, on a joint and several, senior unsecured basis, by substantially all of Gray Television, Inc.’s subsidiaries. Any subsidiaries of Gray Television, Inc. that do not guarantee the 2026 Notes, 2027 Notes, 2030 Notes and 2031 Notes are not material or are designated as unrestricted under the Senior Credit Facility. As of December 31, 2023, there were no significant restrictions on the ability of Gray Television, Inc.'s subsidiaries to distribute cash to Gray or to the guarantor subsidiaries.

 

The 2019 Senior Credit Facility contains affirmative and restrictive covenants with which we must comply, including: (a) limitations on additional indebtedness, (b) limitations on liens, (c) limitations on the sale of assets, (d) limitations on guarantees, (e) limitations on investments and acquisitions, (f) limitations on the payment of dividends and share repurchases, (g) limitations on mergers and (h) maintenance of the First Lien Leverage Ratio while any amount is outstanding under the revolving credit facility, as well as other customary covenants for credit facilities of this type. The 2026 Notes, 2027 Notes, 2030 Notes and 2031 Notes include covenants with which we must comply which are typical for borrowing transactions of their nature. As of December 31, 2023 and 2022, we were in compliance with all required covenants under all of our debt obligations.