Debt

6 Months Ended

Jun. 30, 2019

Our long-term debt as of June 30, 2019 and December 31, 2018 consisted of the following:



	June 30, 2019					December 31, 2018
	Amount			Interest Rate		Amount			Interest Rate
	(In thousands, except percentages)
Dean Foods Company debt obligations:
Senior secured revolving credit facility	$	6,400		7.25	% *	$	19,300		4.65	% *
Senior notes due 2023	700,000			6.50		700,000			6.50
	706,400					719,300
Subsidiary debt obligations:
Receivables securitization facility	280,000			3.89	*	190,000			3.54	*
Finance lease and other	2,560			—		1,618			—
	282,560					191,618
Subtotal	988,960					910,918
Unamortized debt issuance costs	(4,025		)			(4,574		)
Total debt	984,935					906,344
Less current portion	(1,060		)			(1,174		)
Total long-term portion	$	983,875				$	905,170

* Represents a weighted average rate, including applicable interest rate margins.

The scheduled debt maturities were as follows (in thousands):



	As of June 30, 2019
2019	$	557
2020	541
2021	159
2022	280,170
2023	700,182
Thereafter(1)	7,351
Subtotal	988,960
Less unamortized debt issuance costs	(4,025		)
Total debt	$	984,935

(1) Our senior secured revolving credit facility was extended on February 22, 2019 to a maturity date of February 22, 2024 that springs to September 15, 2022 in the event we don’t repay or refinance $700 million in aggregate principal amount of 6.50% senior notes due 2023 (the “2023 Notes”) on or prior to July 15, 2022.

Senior Secured Revolving Credit Facility — On February 22, 2019, we entered into that certain Credit Agreement, by and among the Company, Coöperatieve Rabobank U.A., New York Branch, as administrative agent, and the lenders party thereto (the “Credit Agreement”), pursuant to which the lenders party thereto have provided us with a senior secured revolving borrowing base credit facility with a maximum facility amount of up to $265 million (the “Credit Facility”). Borrowings under the Credit Facility are limited to the lower of the maximum facility amount and borrowing base availability. The borrowing base availability amount is equal to 65% of the appraised value of certain of our real property and equipment. We have currently elected to include real estate and equipment with appraised values sufficient to support a borrowing base of $265 million. Our ability to access the full borrowing base is limited by the requirement under the Credit Agreement to maintain liquidity (defined to include available commitments under the Credit Facility and unrestricted cash on hand and/or cash restricted in favor of the lenders in an aggregate amount of up to $25 million for all such cash) in an amount equal to 50% of the borrowing base under the Credit Facility at any time when the Company's fixed charge coverage ratio is less than 1.05 to 1.00. The Credit Facility matures on February 22, 2024, with a September 15, 2022 springing maturity date in the event the 2023 Notes are not refinanced or repaid on or prior to July 15,

2022. A portion of the Credit Facility is available for the issuance of up to $25 million of standby letters of credit and up to $10 million of swing line loans.

Loans outstanding under the Credit Facility bear interest, at our option, at either: (i) the Base Rate (as defined in the Credit Agreement) or (ii) the Adjusted Eurodollar Rate (as defined in the Credit Agreement), plus a margin of between 1.25% and 1.75% (in the case of Base Rate loans) or 2.25% and 2.75% (in the case of Eurodollar Rate loans), in each case based on our total net leverage ratio.

We may make optional prepayments of the loans, in whole or in part, without penalty (other than applicable breakage and redeployment costs). Subject to certain exceptions and conditions described in the Credit Agreement, we will be obligated to prepay the Credit Facility, and with a 50% commitment reduction, with the net cash proceeds of certain asset sales and with casualty insurance proceeds relating to the assets not included in the borrowing base. The Credit Facility is guaranteed by our existing and future wholly owned material domestic subsidiaries, which are substantially all of our existing domestic subsidiaries other than the subsidiaries that are sellers under the Receivables Securitization Facility.

The Credit Agreement contains customary representations, warranties and covenants, including, but not limited to specified restrictions on indebtedness, liens, guarantee obligations, mergers, acquisitions, consolidations, liquidations and dissolutions, sales of assets, leases, payment of dividends and other restricted payments, voluntary payments of the 2023 Notes, investments, loans and advances, transactions with affiliates and sale and leaseback transactions. The Credit Agreement also contains customary events of default and related cure provisions. The Credit Agreement includes a fixed charge covenant that requires us to maintain a fixed charge coverage ratio of at least 1.05 to 1.00 at any time that our liquidity (defined to include available commitments under the Credit Facility and unrestricted cash on hand and/or cash restricted in favor of the lenders in an aggregate amount of up to $25 million for all such cash) at such time is less than 50% of the borrowing base under the Credit Facility.

On June 28, 2019, we amended the Credit Agreement to, among other things, permit our borrowing base to equal 65% of the appraised value of the real property and equipment included in the appraisal report delivered to the administrative agent (up to maximum facility amount).

In connection with the execution of the Credit Agreement, including the amendment thereof and post-closing appraisal work, we paid certain arrangement fees of approximately $4.9 million to lenders and other fees of approximately $1.9 million, which were capitalized and will be amortized to interest expense over the remaining term of the facility. Additionally, we wrote off $3.3 million of unamortized deferred financing costs in connection with the termination of that certain Credit Agreement, originally dated as of March 26, 2015, among the Company, Bank of America, N.A., as Administrative Agent and the lenders party thereto (as amended, the “prior credit agreement”).

At June 30, 2019, we had $6.4 million outstanding borrowings under the Credit Facility. Our average daily balance under the Credit Facility during the six months ended June 30, 2019 was $16.1 million. There were no letters of credit issued under the Credit Facility as of June 30, 2019.

Dean Foods Receivables Securitization Facility — We have a $450 million receivables securitization facility pursuant to which certain of our subsidiaries sell their accounts receivable to two wholly-owned entities intended to be bankruptcy-remote, as is customary for receivables securitization facilities. The entities then transfer the receivables to third-party asset-backed commercial paper conduits sponsored by major financial institutions. The assets and liabilities of these two entities are fully reflected in our unaudited Condensed Consolidated Balance Sheets, and the Receivables Securitization Facility is treated as a borrowing for accounting purposes.

On January 17, 2019, we amended and restated the existing receivables purchase agreement ("Receivables Purchase Agreement") governing our Receivables Securitization Facility to, among other things, (i) waive compliance with the financial covenant in the Receivables Purchase Agreement requiring the Company to maintain a total net leverage ratio (as defined in the Receivables Purchase Agreement) of less than or equal to 4.25 to 1.00 for the test period ended December 31, 2018 (the “Financial Covenant”) and (ii) any cross default under the Receivables Purchase Agreement arising from non-compliance with the Financial Covenant under the prior Credit Facility.

On February 22, 2019, we amended and restated the Receivables Purchase Agreement to, among other things, extend the liquidity termination date. The Receivables Purchase Agreement contains covenants consistent with those contained in the Credit Agreement.

In connection with the execution of this amendment and restatement of the Receivables Purchase Agreement, we paid certain arrangement fees of approximately $2.2 million to lenders and other fees of approximately $0.5 million, which were capitalized and will be amortized to interest expense over the remaining term of the facility. Additionally, we wrote off $0.4 million of unamortized deferred financing costs in connection with prior amendments to the Receivables Purchase Agreement.

Based on the monthly borrowing base formula, we had the ability to borrow up to $428.8 million of the total commitment amount under the Receivables Securitization Facility as of June 30, 2019. The total amount of receivables sold to these entities as of June 30, 2019 was $496.5 million. During the first six months of 2019, we borrowed $0.6 billion and repaid $0.5 billion under the facility with a remaining balance of $280.0 million as of June 30, 2019. In addition to letters of credit in the aggregate amount of $147.9 million that were issued but undrawn, the remaining available borrowing capacity was $0.9 million at June 30, 2019. Our average daily balance under this facility during the six months ended June 30, 2019 was $265.1 million. The receivables securitization facility bears interest at a variable rate based upon commercial paper and one-month LIBO rates plus an applicable margin based on our total net leverage ratio.

Dean Foods Company Senior Notes due 2023 — On February 25, 2015, we issued $700 million in aggregate principal amount of 6.50% senior notes due 2023 at an issue price of 100% of the principal amount of the 2023 Notes in a private placement for resale to “qualified institutional buyers” as defined in Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), and in offshore transactions pursuant to Regulation S under the Securities Act.

In connection with the issuance of the 2023 Notes, we paid certain arrangement fees of approximately $7.0 million to initial purchasers and other fees of approximately $1.8 million, which were deferred and netted against the outstanding debt balance, and will be amortized to interest expense over the remaining term of the 2023 Notes.

The 2023 Notes are our senior unsecured obligations. Accordingly, the 2023 Notes rank equally in right of payment with all of our existing and future senior obligations and are effectively subordinated in right of payment to all of our existing and future secured obligations, including obligations under our Credit Facility and receivables securitization facility, to the extent of the value of the collateral securing such obligations. The 2023 Notes are fully and unconditionally guaranteed on a senior unsecured basis, jointly and severally, by our subsidiaries that guarantee obligations under the Credit Facility.

The 2023 Notes will mature on March 15, 2023, and bear interest at an annual rate of 6.50%. Interest on the 2023 Notes is payable semi-annually in arrears in March and September of each year.

We may, at our option, redeem all or a portion of the 2023 Notes at the applicable redemption prices specified in the indenture governing the 2023 Notes (the "Indenture"), plus any accrued and unpaid interest to, but excluding, the applicable redemption date. If we undergo certain kinds of changes of control, holders of the 2023 Notes have the right to require us to repurchase all or any portion of such holder’s 2023 Notes at 101% of the principal amount of the notes being repurchased, plus any accrued and unpaid interest to, but excluding, the date of repurchase.

The Indenture contains covenants that, among other things, limit our ability to: (i) create certain liens; (ii) enter into sale and lease-back transactions; (iii) assume, incur or guarantee indebtedness for borrowed money that is secured by a lien on certain principal properties (or on any shares of capital stock of our subsidiaries that own such principal properties) without securing the 2023 Notes on a pari passu basis; and (iv) consolidate with or merge with or into, or sell, transfer, convey or lease all or substantially all of our properties and assets, taken as a whole, to another person unless certain customary conditions are met.

The carrying value under the 2023 Notes at June 30, 2019 was $696.0 million, net of unamortized debt issuance costs of $4.0 million.

See Note 8 for information regarding the fair value of the 2023 Notes as of June 30, 2019.

Finance Lease Obligations and Other — Finance lease obligations of $2.6 million and $1.6 million as of June 30, 2019 and December 31, 2018, respectively, were primarily comprised of our leases for information technology equipment. See further discussion of our lease obligations in Note 6.