American Home Shield 2015 Annual Report Download - page 66

48
addition, $42 million of available cash was used to pay debt issuance costs of $24 million and to pay original issue discount of $18
million in connection with the Term Loan Facility.
On July 23, 2014, we entered into two four-year interest rate swap agreements effective August 1, 2014. The aggregate
notional amount of the agreements was $300 million. Under the terms of the agreements, we will pay a weighted-average fixed rate of
interest of 1.786 percent on the $300 million notional amount, and we will receive a floating rate of interest (based on one-month
London inter-bank offered rate “LIBOR”) on the notional amount. Therefore, during the term of the agreements, the effective interest
rate on $300 million of the Term Loan Facility is fixed at a rate of 1.786 percent, plus the incremental borrowing margin of 3.25
percent.
On July 23, 2014, we entered into three forty-one month interest rate swap agreements effective March 1, 2015. The
aggregate notional amount of the agreements was $400 million. Under the terms of the agreements, we will pay a weighted-average
fixed rate of interest of 1.927 percent on the $400 million notional amount, and we will receive a floating rate of interest (based on
one-month LIBOR) on the notional amount. Therefore, during the term of the agreements, the effective interest rate on $400 million
of the Term Loan Facility is fixed at a rate of 1.927 percent, plus the incremental borrowing margin of 3.25 percent.
2020 Notes
On July 16, 2014, we used proceeds from our initial public offering to redeem $210 million of its outstanding 8% 2020 Notes
and $263 million of its outstanding 7% 2020 Notes. In connection with the partial redemption of the 8% 2020 Notes and 7% 2020
Notes, we were required to pay a pre-payment premium of $17 million and $18 million, respectively, and accrued interest of $7
million and $8 million, respectively. Additionally, in connection with the partial redemption of the 8% 2020 Notes and 7% 2020 Notes
and the repayment of the Old Term Facilities, we recorded a loss on extinguishment of debt of $65 million in the year ended
December 31, 2014, which includes the pre-payment premiums on the 8% 2020 Notes and 7% 2020 Notes of $17 million and $18
million, respectively, and the write-off of $30 million of debt issuance costs.
On February 17, 2015, we redeemed $190 million in aggregate principal amount of the 8% 2020 Notes at a redemption price
of 106.0% of the principal amount using available cash. In connection with the partial redemption, we recorded a loss on
extinguishment of debt of $13 million in the year ended December 31, 2015, which includes a pre-payment premium of $11 million
and the write-off of $2 million of debt issuance costs.
On April 1, 2015, we entered into the First Term Loan Amendment, which provides for the April Incremental Term Loans in
an aggregate principal amount of $175 million. On April 1, 2015, we used the net proceeds from the April Incremental Term Loans,
together with cash on hand, to redeem the remaining outstanding $200 million in aggregate principal amount of the 8% 2020 Notes at
a redemption price of 106.0% of the principal amount. In connection with the redemption, we recorded a loss on extinguishment of
debt of $14 million in the year ended December 31, 2015, which includes a pre-payment premium of $12 million and the write-off of
$2 million of debt issuance costs.
On August 17, 2015, we entered into the Second Term Loan Amendment, which provides for the August Incremental Term
Loans in an aggregate principal amount of $400 million. On August 17, 2015, we used the net proceeds from the August Incremental
Term Loans, together with cash on hand, to redeem the remaining outstanding $488 million in aggregate principal amount of the 7%
2020 Notes at a redemption price of 105.25% of the principal amount. In connection with the redemption, we recorded a loss on
extinguishment of debt of $31 million in the year ended December 31, 2015, which includes a pre-payment premium of $25 million
and the write-off of $6 million of debt issuance costs.
Fleet and Equipment Financing Arrangements
We have entered into a fleet management services agreement (the “Fleet Agreement”) which, among other things, allows us
to obtain fleet vehicles through a leasing program. We expect to fulfill substantially all of our vehicle fleet needs through the leasing
program under the Fleet Agreement. For the year ended December 31, 2015, we acquired $21 million of vehicles through the leasing
program under the Fleet Agreement. All leases under the Fleet Agreement are capital leases for accounting purposes. The lease rental
payments include an interest component calculated using a variable rate based on one-month LIBOR plus other contractual
adjustments and a borrowing margin totaling 2.45 percent. We have no minimum commitment for the number of vehicles to be
obtained under the Fleet Agreement.
Additionally, a portion of our property and equipment is leased through programs outside the scope of the Fleet Agreement.
For the year ended December 31, 2015, we acquired $6 million of property and equipment through these incremental leasing
programs, which are treated as capital leases for accounting purposes. We anticipate new lease financing, including the Fleet
Agreement and incremental leasing programs, for the full year 2016 will range from $35 million to $45 million.
Limitations on Distributions and Dividends by Subsidiaries
We are a holding company, and as such have no independent operations or material assets other than ownership of equity
interests in our subsidiaries. We depend on our subsidiaries to distribute funds to us so that we may pay obligations and expenses,
including satisfying obligations with respect to indebtedness. The ability of our subsidiaries to make distributions and dividends to us
depends on their operating results, cash requirements and financial condition and general business conditions, as well as restrictions
under the laws of our subsidiaries’ jurisdictions.
64 2015 Annual Report