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Credit Facility
12 Months Ended
Oct. 31, 2017
Debt Disclosure [Abstract]  
Credit Facility
CREDIT FACILITY
New Credit Facility
On September 1, 2017, we refinanced and replaced our existing $800.0 million credit facility with a new senior, secured five-year syndicated credit facility (the “Credit Facility”), consisting of a $900.0 million revolving line of credit and an $800.0 million amortizing term loan, scheduled to mature on September 1, 2022. The line of credit reduces to $800.0 million after one year. The Credit Facility also provides for the issuance of up to $300.0 million for standby letters of credit and the issuance of up to $75.0 million in swingline advances. The obligations under the Credit Facility are secured on a first-priority basis by a lien on substantially all of our assets and properties, subject to certain exceptions.
Borrowings under the Credit Facility bear interest at a rate equal to 1-month LIBOR plus a spread that is based upon our leverage ratio. The spread ranges from 1.00% to 2.25% for Eurocurrency loans and 0.00% to 1.25% for base rate loans. At October 31, 2017, the weighted average interest rate on our outstanding borrowings was 3.49%. We also pay a commitment fee, based on our leverage ratio and payable quarterly in arrears, ranging from 0.200% to 0.350% on the average daily unused portion of the line of credit. For purposes of this calculation, irrevocable standby letters of credit, which are issued primarily in conjunction with our insurance programs, and cash borrowings are included as outstanding under the line of credit.
The Credit Facility contains certain covenants, including a maximum leverage ratio of 4.75 to 1.0, which steps down to 3.50 to 1.0 by July 2020, and a minimum fixed charge coverage ratio of 1.50 to 1.0, as well as other financial and non-financial covenants. In the event of a material acquisition, as defined in the Credit Facility, we may elect to increase the leverage ratio to 3.75 to 1.0 for a total of four fiscal quarters, provided the leverage ratio had already been reduced to 3.50 to 1.0. The availability of our borrowing capacity is subject to, and limited by, compliance with the covenants described above. At October 31, 2017, we were in compliance with these covenants.
The Credit Facility also includes customary events of default, including failure to pay principal, interest, or fees when due, failure to comply with covenants, the occurrence of certain material judgments, or a change in control of the Company. If an event of default occurs, including certain cross-defaults, insolvency, change in control, or violation of specific covenants, the lenders can terminate or suspend our access to the Credit Facility and declare all amounts outstanding (including all accrued interest and unpaid fees) to be immediately due and payable, and require that we cash collateralize the outstanding standby letters of credit.
Total deferred financing costs related to the Credit Facility were $18.7 million, consisting of $13.4 million related to the term loan and $5.2 million related to the line of credit, which are being amortized to interest expense over the term of the Credit Facility.
Credit Facility Information
(in millions)
 
October 31, 2017
Current portion of long-term debt
 
 
Gross term loan
 
$
20.0

Less: unamortized deferred financing costs
 
(3.1
)
Current portion of term loan
 
$
16.9

 
 
 
Long-term debt
 
 
Gross term loan
 
$
780.0

Less: unamortized deferred financing costs
 
(9.9
)
Total noncurrent portion of term loan
 
770.1

Line of credit(1)(2)
 
391.2

Long-term debt
 
$
1,161.3


(1)Standby letters of credit amounted to $146.4 million at October 31, 2017.
(2)At October 31, 2017, we had borrowing capacity of $350.8 million, however covenant restrictions limited our borrowing capacity to $282.0 million.
Term Loan Maturities
($ in millions)
 
2018
 
2019
 
2020
 
2021
 
2022
 
Total
Debt maturities
 
$
20.0

 
$
40.0

 
$
60.0

 
$
120.0

 
$
560.0

 
$
800.0

Principal repayment
 
2.5
%
 
5.0
%
 
7.5
%
 
15.0
%
 
70.0
%
 
 

Interest Rate Swaps
We enter into interest rate swaps to manage the interest rate risk associated with our floating-rate, LIBOR-based borrowings under our Credit Facility. Under these arrangements, we typically pay a fixed interest rate in exchange for LIBOR-based variable interest throughout the life of the agreement.
During 2016, we entered into three interest rate swap agreements with effective dates of April 7, 2016 and May 11, 2016, an underlying aggregate notional amount of $105.0 million, and a fixed interest rate of 1.05%. These swaps were designated and accounted for as cash flow hedges from inception and mature on April 7, 2021 and May 11, 2021. These interest rate swap agreements remain in effect with our new Credit Facility. See Note 7, “Fair Value of Financial Instruments,” regarding the valuation of our interest rate swaps.
In connection with our Credit Facility, in September 2017 we entered into three additional forward-starting interest rate swap agreements that became effective in November 2017. These swaps have an underlying aggregate notional amount of $500.0 million, fixed interest rates of 1.65% and 1.69%, mature on September 1, 2022, and were designated and accounted for as cash flow hedges from inception.
We initially report the effective portion of a derivative’s mark-to-market gain or loss as a component of AOCL and subsequently reclassify the gain or loss into earnings when the hedged transactions occur and affect earnings. The ineffective portion of the gain or loss is reported in earnings immediately. Interest payables and receivables under the swap agreements are accrued and recorded as adjustments to interest expense.    
At October 31, 2017 and 2016, the amounts recorded in AOCL were $1.7 million and $0.2 million, respectively, related to the interest rate swap agreements in effect on those dates. Additionally, at October 31, 2017, the amount expected to be reclassified from AOCL to earnings for those interest rate swap agreements during the next twelve months was insignificant.