NOTE 6—LONG-TERM DEBT

The Company’s long-term debt consisted of the following:



	December 3, 2016			February 27, 2016
5.50% Secured Term Loan Facility due March 2019	$	1,356		$	1,459
6.75% Senior Notes due June 2021	400			400
7.75% Senior Notes due November 2022	350			350
1.69% to 3.75% Revolving ABL Credit Facility due February 2021	260			138
Debt financing costs, net	(37		)	(45		)
Original issue discount on debt	(2		)	(5		)
Total debt	2,327			2,297
Less current maturities of long-term debt	(1,066		)	(100		)
Long-term debt	$	1,261		$	2,197

The Company’s credit facilities and certain long-term debt agreements have restrictive covenants and cross-default provisions, which generally provide, subject to the Company’s right to cure, for the acceleration of payments due in the event of a breach of a covenant or a default in the payment of a specified amount of indebtedness due under certain other debt agreements. The Company was in compliance with all such covenants and provisions for all periods presented.

Senior Secured Credit Agreements

As of December 3, 2016 and February 27, 2016, the Company had outstanding borrowings of $1,356 and $1,459, respectively, under its $1,500 term loan facility (the “Secured Term Loan Facility”), which is secured by substantially all of the Company’s real estate, equipment and certain other assets, and bears interest at the rate of LIBOR plus 4.50 percent subject to a floor on LIBOR of 1.00 percent. As of December 3, 2016, $832 of the Secured Term Loan Facility and the related debt financing costs and original issue discount were classified as current based on the prepayments that were required with the Net Cash Proceeds (as defined in the facility) from the disposition of the Save-A-Lot business, as discussed below. As of December, 3, 2016, $260 of the Company’s $1,000 asset-based revolving ABL credit facility (the “Revolving ABL Credit Facility”) and the related debt financing costs were classified as current based on the Company’s agreement with the Pension Benefit Guaranty Corporation (“PBGC”) to repay any outstanding balance under this facility from the Sale proceeds and the Company’s subsequent such repayment. As of February 27, 2016, $102 of the Secured Term Loan Facility was classified as current, excluding debt financing costs and original issue discount.

The Secured Term Loan Facility is guaranteed by the Company’s material subsidiaries (together with the Company, the “Term Loan Parties”). To secure their obligations under the Secured Term Loan Facility, the Term Loan Parties have granted a perfected first-priority security interest in substantially all of their intellectual property and a first-priority mortgage lien and security interest in certain owned or ground-leased real estate and associated equipment pledged as collateral. As of December 3, 2016, there was $778 of owned or ground-leased real estate and associated equipment pledged as collateral, $497 of which was included in Property, plant and equipment, net and $281 of which was included in Long-term assets of discontinued operations in the Condensed Consolidated Balance Sheets. As of February 27, 2016, there was $781 of owned or ground-leased real estate and associated equipment pledged as collateral, $507 of which was included in Property, plant and equipment, net and $274 of which was included in Long-term assets of discontinued operations in the Condensed Consolidated Balance Sheets. In addition, the obligations of the Term Loan Parties under the Secured Term Loan Facility are secured by second-priority security interests in the collateral securing the Revolving ABL Credit Facility.

On May 20, 2016, the Company entered into a third amendment to the Secured Term Loan Facility (the “Third Term Loan Amendment”) that would permit the Company and its subsidiaries to undertake certain transactions reasonably determined by the Company to be necessary to effectuate a separation of the Save-A-Lot business. The Third Term Loan Amendment also increased the interest rate for the term loan from LIBOR plus 3.50 percent to LIBOR plus 4.50 percent with the floor on LIBOR remaining at 1.00 percent, subject to a further increase of 0.25 percent if certain rating conditions are not satisfied. During first quarter ended June 18, 2016, in connection with the completion of the Third Term Loan Amendment, the Company paid debt financing costs of approximately $5, of which $4 was capitalized and $1 was expensed in Interest expense, net, and recognized non-cash charges of approximately $3 in Interest expense, net for the write-off of existing unamortized debt financing costs and $1 for the accelerated amortization of original issue discount.

The loans under the Secured Term Loan Facility may be voluntarily prepaid in certain minimum principal amounts, subject to the payment of breakage or similar costs. Pursuant to the Secured Term Loan Facility, the Company must, subject to certain customary reinvestment rights, apply 100 percent of Net Cash Proceeds (as defined in the facility) from certain types of asset sales (excluding proceeds of the collateral security of the Revolving ABL Credit Facility and other secured indebtedness) to prepay the loans outstanding under the Secured Term Loan Facility. The Company must also prepay loans outstanding under the facility no later than 90 days after the fiscal year end in an aggregate principal amount equal to a percentage (which percentage ranges from 0 to 50 percent depending on the Company’s Total Secured Leverage Ratio (as defined in the facility) as of the last day of such fiscal year) of Excess Cash Flow (as defined in the facility) for the fiscal year then ended minus any voluntary prepayments made during such fiscal year with Internally Generated Cash (as defined in the facility). Based on the Company's Excess Cash Flow in fiscal 2016, a $99 prepayment was required and paid in the first quarter ended June 18, 2016. Based on the Company’s estimated Total Secured Leverage Ratio (as defined in the facility) as of the last day of fiscal 2017, no prepayment from Excess Cash Flow in fiscal 2017 is expected to be required in the first quarter of fiscal 2018.

The Company consummated the Sale of its Save-A-Lot business during the fourth quarter of fiscal 2017. Pursuant to the Secured Term Loan Facility, the Company made prepayments in an aggregate amount of $832 towards the Secured Term Loan Facility, which represents $750 plus 50% of the Net Cash Proceeds in excess of $750 that caused the Company’s Total Secured Leverage Ratio, on a pro forma basis after giving effect to such prepayment, to be no higher than 1.50:1.00. In connection with these mandatory prepayments, the Company will recognize non-cash charges of approximately $10 in Interest expense, net for the write-off of existing unamortized debt financing costs and $2 for the accelerated amortization of original issue discount based on the aggregate amount of the prepayments in the fourth quarter of fiscal 2017. Additionally, the security interests in the equity interests of Moran Foods and the Save-A-Lot assets were released under the Secured Term Loan Facility and the Revolving ABL Credit Facility at the time of the Sale.

As of December 3, 2016 and February 27, 2016, there were $260 and $138, respectively, of outstanding borrowings under the Revolving ABL Credit Facility. As of December 3, 2016, letters of credit outstanding under the Revolving ABL Credit Facility were $65 at fees of 1.375 percent, and the unused available credit under this facility was $675 with facility fees of 0.25 percent. As of February 27, 2016, letters of credit outstanding under the Revolving ABL Credit Facility were $69 at fees of 1.625 percent, and the unused available credit under this facility was $744 with facility fees of 0.25 percent. As of December 3, 2016, the Revolving ABL Credit Facility was secured on a first-priority basis by $1,078 of certain inventory assets included in Inventories, net, $246 of certain receivables included in Receivables, net, $21 of certain amounts included in Cash and cash equivalents and all of the Company’s pharmacy scripts included in Intangible assets, net and $340 of certain amounts included in Current assets of discontinued operations in the Condensed Consolidated Balance Sheets. As of February 27, 2016, the Revolving ABL Credit Facility was secured on a first-priority basis by $931 of certain inventory assets included in Inventories, net, $222 of certain receivables included in Receivables, net, $16 of certain amounts included in Cash and cash equivalents and all of the Company's pharmacy scripts included in Intangible assets, net and $314 of certain amounts included in Current assets of discontinued operations in the Condensed Consolidated Balance Sheets.

The revolving loans under the Revolving ABL Credit Facility may be voluntarily prepaid in certain minimum principal amounts, in whole or in part, without premium or penalty, subject to breakage or similar costs. The Company and those subsidiaries named as borrowers under the Revolving ABL Credit Facility are required to repay the revolving loans in cash and provide cash collateral under this facility to the extent that the revolving loans and letters of credit exceed the lesser of the borrowing base then in effect or the aggregate amount of the lenders’ commitments under the Revolving ABL Credit Facility. During fiscal 2017 year-to-date, the Company borrowed $2,837 and repaid $2,715 under its Revolving ABL Credit Facility. During fiscal 2016 year-to-date, the Company borrowed $234 and repaid $234 under its Revolving ABL Credit Facility. Certain of the Company’s material subsidiaries are co-borrowers under the Revolving ABL Credit Facility, and this facility is guaranteed by the rest of the Company’s material subsidiaries (the Company and those subsidiaries named as borrowers and guarantors under the Revolving ABL Credit Facility, the “ABL Loan Parties”). To secure their obligations under this facility, the ABL Loan Parties have granted a perfected first-priority security interest for the benefit of the facility lenders in their present and future inventory, credit card, wholesale trade, pharmacy and certain other receivables, prescription files and related assets. In addition, the obligations under the Revolving ABL Credit Facility are secured by second-priority liens on and security interests in the collateral securing the Secured Term Loan Facility, subject to certain limitations to ensure compliance with the Company’s outstanding debt instruments and leases.

Both the Secured Term Loan Facility and the Revolving ABL Credit Facility limit the Company’s ability to make Restricted Payments (as defined in both the Secured Term Loan Facility and the Revolving ABL Credit Facility), which include dividends to stockholders. The Secured Term Loan Facility caps the aggregate amount of Restricted Payments that may be made over the life of the Secured Term Loan Facility. That aggregate cap can fluctuate over time and the cap could be reduced by certain other actions taken by the Company, including certain debt prepayments and Permitted Investments (as defined in the Secured Term Loan Facility). As of December 3, 2016, the aggregate cap on Restricted Payments was approximately $398. The Revolving ABL Credit Facility permits dividends up to $75 per fiscal year, not to exceed $175 in the aggregate over the life of the Revolving ABL Credit Facility as long as no Cash Dominion Event (as defined in the Revolving ABL Credit Facility) exists. Those caps could be reduced by certain debt prepayments made by the Company. The Revolving ABL Credit Facility permits other Restricted Payments as long as the Payment Conditions (as defined in the Revolving ABL Credit Facility) are met.

Debentures

The $400 of 6.75 percent Senior Notes due June 2021 and the $350 of 7.75 percent Senior Notes due November 2022 contain operating covenants, including limitations on liens and on sale and leaseback transactions. The Company was in compliance with all such covenants and provisions for all periods presented.