Leonardo DRS, Inc.DRS
Leonardo DRS, Inc. Debt Disclosure
Debt
The Company’s debt consists of the following:
| December 31, | |||||||||||
| (Dollars in millions) | 2025 | 2024 | |||||||||
| 2022 Term Loan A | $ | 191 | $ | 203 | |||||||
| Finance lease and other | 152 | 159 | |||||||||
| Short-term borrowings related to factoring facilities (Note 4) | 5 | 4 | |||||||||
Total debt principal | 348 | 366 | |||||||||
| Less unamortized debt issuance costs and discounts | (1) | (1) | |||||||||
Total debt, net | 347 | 365 | |||||||||
| Less short-term borrowings and current portion of long-term debt | (26) | (25) | |||||||||
Total long-term debt | $ | 321 | $ | 340 | |||||||
Term Loan
In November 2022, the Company entered into a senior unsecured credit agreement with Bank of America in the amount of $500 million (the “2022 Credit Agreement”) with a maturity of November 29, 2027. The 2022 Credit Agreement provides for a term loan (the “2022 Term Loan A”) of $225 million bearing interest at a variable rate generally based on the Secured Overnight Financing Rate (“SOFR”), plus a spread ranging from 1.48% to 2.10% depending on the leverage ratio, as defined in the 2022 Credit Agreement, or an alternative variable rate based on the higher of the Bank of America prime rate, the federal funds rate, or a rate generally based on the SOFR, in each case subject to an additional basis point spread as defined in the 2022 Credit Agreement. Interest is payable quarterly in arrears. The outstanding balance of the 2022 Term Loan A at December 31, 2025 was $191 million. The fair value of the 2022 Term Loan A was approximately $190 million and $199 million at December 31, 2025 and 2024, respectively; however the Company has the ability to prepay the outstanding principal balance without penalty.
Subsequent to year-end, in January 2026, the Company repaid the remaining outstanding balance of the 2022 Term Loan A in the amount of $191 million. The was no prepayment penalty or other fee associated with prepaying the principal balance.
Credit Facilities
The 2022 Credit Agreement provides for a revolving credit facility available for the working capital needs of the Company (the “2022 Revolving Credit Facility”). As of December 31, 2025, the 2022 Revolving Credit Facility had a limit of $275 million. Loans under the 2022 Revolving Credit Facility bear interest at a variable rate generally based on the SOFR, plus a spread ranging from 1.48% to 2.10% depending on the leverage ratio, as defined in the 2022 Credit Agreement, or an alternative variable rate based on the higher of the Bank of America prime rate, the federal funds rate, or a rate generally based on the SOFR, in each case subject to an additional basis point spread as defined in the 2022 Credit Agreement. The Company also pays a commitment fee ranging between 0.20% and 0.35% depending on the Company’s leverage ratio applied to the unused balance of the 2022 Revolving Credit Facility. There was no outstanding balance on the 2022 Revolving Credit Facility as of December 31, 2025 and 2024. The weighted average interest rate on the 2022 Revolving Credit Facility as of December 31, 2024 was 6.72%.
Subsequent to year-end, in January 2026, the Company terminated the 2022 Credit Agreement and entered into a new senior unsecured credit agreement (the “2026 Credit Agreement”). The 2026 Credit
Agreement provides for a revolving credit facility available for working capital requirements of the Company (the “2026 Revolving Credit Facility”). The 2026 Revolving Credit Facility has a limit of $500 million and expires in January 2031. Loans under the 2026 Revolving Credit Facility bear interest at a variable rate generally based on the SOFR, plus a spread ranging from 1.25% to 1.63% depending on the leverage ratio, as defined in the 2026 Credit Agreement, or an alternative variable rate based on the higher of the prime rate, as defined in the 2026 Credit Agreement, the federal funds rate, or a rate generally based on the SOFR, in each case subject to an additional basis point spread as defined in the 2026 Credit Agreement. The Company also pays a commitment fee ranging between 0.15% and 0.30% depending on the Company’s leverage ratio applied to the unused balance of the 2026 Revolving Credit Facility.
The Company also maintains uncommitted working capital credit facilities with certain financial institutions in the aggregate of $105 million and $130 million at December 31, 2025 and 2024, respectively (the “Financial Institution Credit Facilities”). The sole purpose of the Financial Institution Credit Facilities is to support standby letter of credit issuances on contracts with customers. The Company had letters of credit outstanding of approximately $54 million and $36 million as of December 31, 2025 and 2024, respectively, which reduces the available capacity of the Financial Institution Credit Facilities by an equal amount.
Finance Lease and Other
As of December 31, 2025, finance lease and other of $152 million includes approximately $106 million related to finance lease liabilities and $46 million related to our Menomonee Falls, WI manufacturing facility, which has been accounted for as a financing arrangement. Approximately $10 million has been recognized as the current portion of long-term debt for the finance lease liabilities and aforementioned financing arrangement.
Interest Paid
Total interest paid associated with our debt was $21 million, $27 million, and $38 million in 2025, 2024 and 2023, respectively. Our effective interest rate was approximately 5.71%, 6.80% and 6.65% for the years ended December 31, 2025, 2024 and 2023, respectively. The interest expense attributable to the amortization of debt issuance costs in 2025, 2024 and 2023 was not material.
Maturities
Maturities of debt as of December 31, 2025 are as follows:
| (Dollars in millions) | ||||||||
| Year Ending December 31, | Total | |||||||
| 2026 | $ | 26 | ||||||
| 2027 | 189 | |||||||
| 2028 | 8 | |||||||
| 2029 | 8 | |||||||
| 2030 | 9 | |||||||
| Thereafter | 108 | |||||||
Total principal payments | $ | 348 | ||||||
Historical Timeline
| Fiscal Year | Filed | |
|---|---|---|
| 2025 | Feb 27, 2026 | Showing above |
| 2024 | Mar 3, 2025 | |
| 2023 | Feb 28, 2024 | |
| 2022 | Mar 28, 2023 | |
| 2021 | Mar 28, 2022 | |
About Debt Disclosures
Debt disclosures detail a company's borrowing structure — the types of instruments, interest rates, maturity schedule, and covenant restrictions that define its financial obligations and flexibility. This section is essential for assessing refinancing risk, interest rate exposure, and the margin of safety against financial distress.
Key signals: the maturity schedule reveals concentration risk — large maturities within 1-2 years during tight credit markets can force dilutive refinancing or asset sales. Compare the fair value of debt against carrying amount to gauge whether the market views the company's credit risk differently than the balance sheet suggests. Watch covenant compliance disclosures for tightening cushions, especially leverage and interest coverage ratios. Variable-rate debt exposure quantifies sensitivity to interest rate changes. Secured versus unsecured mix affects recovery rates and future borrowing capacity. Compare net debt-to-EBITDA against industry peers and covenant limits to assess financial health.