DEBT |
3 Months Ended | ||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
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Mar. 30, 2025 | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| DEBT | DEBT Debt consisted of the following (in thousands):
2025 Credit Agreement On January 27, 2025 (the “2025 Credit Agreement Closing Date”), PHD Intermediate LLC ("Holdings"), Portillo’s Holdings LLC (the "Borrower"), the other Guarantors party thereto, the Lenders from time to time party thereto and Fifth Third Bank, National Association, as Administrative Agent (in such capacities, the "Administrative Agent"), the L/C Issuer and the Swing Line Lender entered into an amendment (the “Amendment”) to the credit agreement, dated as of February 2, 2023 (the "Existing Credit Agreement" and the Existing Credit Agreement as amended by the Amendment and as may be amended, restated, supplemented or otherwise modified from time to time thereafter, the "2025 Credit Agreement"), by and among Holdings, the Borrower, the other Guarantors from time to time party thereto, the Lenders from time to time party thereto and the Administrative Agent. The arrangement was accounted for as a debt modification. The Existing Credit Agreement provided for a term A loan (the "2023 Term Loan") in an initial aggregate principal amount of $300.0 million and revolving credit commitments in an initial aggregate principal amount of $100.0 million (the "2023 Revolver Facility"). The Amendment provides for, among other things, (i) a $250 million term loan A facility (the “2025 Term Loan”) and (ii) revolving credit commitments in an initial aggregate principal amount of $150 million (the “2025 Revolver Facility” and, together with the Term Loan Facility, the “2025 Facilities”). The loans under each of the 2025 Facilities mature on January 27, 2030. The 2023 Term Loan and 2023 Revolver Facility accrued, and the 2025 Term Loan and 2025 Revolver Facility will accrue interest at the forward-looking secured overnight financing rate ("SOFR") plus an applicable rate determined upon the consolidated total net rent adjusted leverage ratio, in each case subject to a 0.0% floor. As of March 30, 2025, the interest rate on the 2025 Term Loan and 2025 Revolver Facility was 6.58% and 6.57%, respectively. Pursuant to the 2025 Credit Agreement, as of March 30, 2025, the commitment fees to maintain the 2025 Revolver Facility were 0.20%, and letter of credit fees were 2.25%. Commitment fees and letter of credit fees are recorded as interest expense in the condensed consolidated statements of operations. As of March 30, 2025, the effective interest rate was 7.02%. As of March 31, 2024, the interest rates on the 2023 Term Loan and 2023 Revolver Facility were 7.96% and 7.93%, respectively. Pursuant to the Existing Credit Agreement as of March 31, 2024, the commitment fees to maintain the 2023 Revolver Facility were 0.20% and letter of credit fees were 2.50%. As of March 31, 2024, the effective interest rate was 8.37%. The 2025 Term Loan Facility will amortize in quarterly installments equaling an aggregate amount of $6.3 million for the first 2 years following the 2025 Credit Agreement Closing Date, (ii) $12.5 million for the third and fourth years following the 2025 Credit Agreement Closing Date and (iii) $25.0 million for the fifth year following the 2025 Credit Agreement Closing Date, commencing on the last day of the first full fiscal quarter ended after the 2025 Credit Agreement Closing Date, with the balance payable on the final maturity date. As of March 30, 2025, outstanding borrowings under the 2025 Credit Agreement totaled $323.0 million, comprised of $250.0 million under the 2025 Term Loan, and $73.0 million under the 2025 Revolver Facility. Letters of credit issued under the 2025 Revolver Facility totaled $5.3 million. As a result, as of March 30, 2025, the Company had $71.7 million available under the 2025 Revolver Facility. As of December 29, 2024, outstanding borrowings under the Existing Credit Agreement totaled $313.8 million, comprised of $288.8 million under the 2023 Term Loan, and $25.0 million under the 2023 Revolver Facility. Letters of credit issued under the 2023 Revolver Facility totaled $5.3 million. As a result, as of December 29, 2024, the Company had $69.7 million available under the 2023 Revolver Facility. All amounts outstanding under the 2023 Term Loan and 2023 Revolver Facility were refinanced in connection with the Amendment. Discount, Debt Issuance Costs and Interest Expense Pursuant to the 2025 Credit Agreement, the Company capitalized deferred financing costs and issuance discounts of $1.3 million. The remaining unamortized costs under the 2023 Credit Agreement were $2.0 million. The total deferred financing costs and issuance discounts of $3.3 million will be amortized over the term of the 2025 Credit Agreement. The Company amortized an immaterial amount of deferred financing costs during both the quarters ended March 30, 2025 and March 31, 2024, which is included in interest expense in the condensed consolidated statements of operations. In addition, the Company also amortized $0.1 million and $0.2 million in original issue discount related to the long-term debt during the quarters ended March 30, 2025 and March 31, 2024, respectively, which is included in interest expense in the condensed consolidated statements of operations. Total interest expense was $5.7 million and $6.5 million for the quarters ended March 30, 2025 and March 31, 2024, respectively. Fair Value of Debt As of March 30, 2025 and December 29, 2024, the fair value of long-term debt approximates the carrying value as it is variable rate debt. The fair value measurement of this debt is considered Level 2 of the fair value hierarchy as inputs to interest are observable, unadjusted quoted prices in active markets for similar assets or liabilities. Guarantees and Covenants The 2025 Credit Agreement contains customary representations and warranties, events of default, reporting and other affirmative covenants and negative covenants, including limitations on indebtedness, liens, investments, negative pledges, dividends, junior financings and other fundamental changes. The 2025 Facilities are guaranteed, subject to customary exceptions, by all of the Borrower’s wholly-owned domestic restricted subsidiaries and Holdings, and are secured by a lien on substantially all of the Borrower’s assets, including fixed assets and intangibles, and the assets of the Guarantors, in each case, subject to customary exceptions. Failure to comply with these covenants and restrictions could result in an event of default under the 2025 Credit Agreement. In such an event, all amounts outstanding under the 2025 Credit Agreement, together with any accrued interest, could then be declared immediately due and payable. As of March 30, 2025, the Company was in compliance with financial covenants in the 2025 Credit Agreement.
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