Long-Term Debt

9 Months Ended

Apr. 30, 2019

14.	Long-Term Debt

The components of long-term debt are as follows:


	April 30, 2019			July 31, 2018
Term loan	$	2,077,665		$	—
Asset-based loan		60,000			—
Unsecured notes		28,045			—
Other debt		99,541			—

Gross long-term debt		2,265,251			—
Debt issuance costs, net		(53,343	)		—

Total long-term debt, net		2,211,908			—
Less: current portion of long-term debt		(29,619	)		—

Total long-term debt, less current portion	$	2,182,289		$	—

On February 1, 2019, the Company entered into a seven-year term loan (“term loan”) agreement, which consists of both a United States Dollar-denominated term loan tranche of $1,386,434 and a Euro-denominated term loan tranche of 617,718 Euro ($708,584 at closing date exchange rate) and a $750,000 asset-based credit facility (“ABL”). Subject to earlier termination, the term loan matures on February 1, 2026 and the ABL matures on February 1, 2024.

Under the term loan, both the U.S. and Euro tranches require annual principal payments of 1.0% of the initial term loan balance, payable quarterly in 0.25% installments starting on May 1, 2019. The first installment on the Euro tranche, however, was paid in April 2019. The interest rate on the U.S. portion of the term loan is an annual base rate plus 2.75%, or LIBOR plus 3.75%, and the interest rate on the Euro portion is at EURIBOR plus 4.00%, with interest on the U.S. base rate tranche payable quarterly, and interest on the U.S. LIBOR portion and the Euro tranche payable monthly. As of April 30, 2019, the entire U.S. term loan tranche balance of $1,386,434 was subject to a LIBOR-based rate totaling 6.3125%, but the interest rate on $900,000 of that balance was fixed at 6.2160% through an interest rate swap by swapping the underlying

1-month

LIBOR rate for a fixed rate of 2.4660%. The total interest rate on the April 30, 2019 Euro term loan tranche balance of $691,231 was 4.00%. In addition, the Company must make mandatory prepayments of principal under the term loan agreement upon the occurrence of certain specified events, including certain asset sales, debt issuances and receipt of annual cash flows in excess of certain amounts. No such specified events occurred during the three months ended April 30, 2019. The Company may, at its option, prepay any borrowings under the term loan, in whole or in part, at any time without premium or penalty (except in certain circumstances). The Company may add one or more incremental term loan facilities to the term loan, subject to obtaining commitments from any participating lenders and certain other conditions.

Availability under the ABL agreement is subject to a borrowing base based on a percentage of applicable eligible receivables and eligible inventory. The ABL carries interest at an annual base rate plus 0.25% to 0.75%, or LIBOR plus 1.25% to 1.75%, based on adjusted excess availability as defined in the ABL agreement, with the applicable base rate and LIBOR margins being stipulated at 0.25% and 1.25%, respectively, for the third quarter of fiscal 2019 per the ABL agreement. As of April 30, 2019, the total interest rate on the ABL borrowings of $60,000 was 3.75%. This agreement also includes a 0.25% unused facility fee. The Company may, generally at its option, pay any borrowings under the ABL, in whole or in part, at any time and from time to time, without premium or penalty.

The ABL contains a financial covenant which requires the Company to maintain a minimum consolidated fixed-charge coverage ratio of 1.0X, provided that the covenant is only applicable when adjusted excess availability falls below a threshold of the greater of a) 10% of the lesser of the borrowing base availability or the revolver line total, or b) $60,000. Up to $75,000 of the ABL is available for the issuance of letters of credit, and up to $75,000 is available for swingline loans. The Company may also increase commitments under the ABL by up to $150,000 by obtaining additional commitments from lenders and adhering to certain other conditions. The unused availability under the ABL is generally available to the Company for general operating purposes, and totaled $618,275 as of April 30, 2019.

The unsecured notes of 25,000 Euro ($28,045) relate to long-term debt assumed at the closing of the acquisition of EHG. There are two series, 20,000 Euro ($22,436) with an interest rate of 1.945% maturing in March 2025, and 5,000 Euro ($5,609) with an interest rate of 2.534% maturing February 2028. Other debt relates primarily to real estate loans with varying maturity dates through September 2032 and interest rates ranging from 1.40%—3.43%.

Total contractual gross debt maturities are as follows:


For the remainder of the fiscal year ending July 31, 2019	$	7,450
For the fiscal year ending July 31, 2020		33,755
For the fiscal year ending July 31, 2021		32,752
For the fiscal year ending July 31, 2022		31,461
For the fiscal year ending July 31, 2023		31,581
For the fiscal year ending July 31, 2024 and thereafter		2,128,252

	$	2,265,251

For both the three and nine-month periods ended April 30, 2019, interest expense on the term loan, ABL and other debt facilities was $32,711, and the weighted-average interest rate on borrowings was approximately 5.8% for both periods. The Company incurred fees totaling $55,688 and $13,532 to secure the term loan and ABL, respectively, and those amounts are being amortized ratably over the respective seven and five-year terms of those agreements. The Company recorded total charges related to the amortization of these term loan and ABL fees, which are included in interest expense, of $2,656 for both the three and nine-month periods ended April 30, 2019. The unamortized balance of the ABL facility fees was $12,855 at April 30, 2019 and is included in Other long-term assets in the Condensed Consolidated Balance Sheets.

For the three and nine-month periods ended April 30, 2018, interest expense on the Company’s previous asset-based credit agreement discussed below was $584 and $1,742, respectively.

Interest expense for the nine-month period ended April 30, 2019 also includes $785 of amortization expense of capitalized debt fees related to the Company’s previous asset-based credit agreement that was terminated on February 1, 2019 with the new financing obtained with the EHG acquisition as described in Note 2 to the Condensed Consolidated Financial Statements. Interest expense for the three and nine-month periods ended April 30, 2018 included $392 and $1,177, respectively, of amortization of debt issuance costs related to the Company’s previous asset-based credit agreement.

The carrying value of the Company’s long-term debt, excluding debt issuance costs, approximates fair value at April 30, 2019 as the balance is subject to variable market interest rates that the Company believes are market rates for a similarly situated Company. The fair value of the Company’s debt is largely estimated using Level 2 inputs as defined by ASC 820.