NOTE 5: DEBT

Debt consisted of the following:



Debt	March 31,			December 31,
(Amounts in thousands)	2013			2012
Revolving credit facility	$	216,000		$	235,000
Term loans	277,500			281,250
Capital lease obligation of PBL	473			507
Total debt	493,973			516,757
Less current maturities	(15,070		)	(15,072		)
Long-term debt, net of current maturities	$	478,903		$	501,685
Weighted average interest rate at end of period	2.70		%	2.71		%

Senior Credit Facilities. The Company, through its wholly-owned subsidiary, Blount, Inc., maintains a senior credit facility with General Electric Capital Corporation as Agent for the Lenders and also as a lender, which has been amended and restated on several occasions. As of March 31, 2013 and December 31, 2012, the senior credit facilities consisted of a revolving credit facility and a term loan.

August 2012 Amendment of Senior Credit Facilities. On August 3, 2012, the senior credit facilities were amended to modify the maximum leverage ratio covenant, as defined below. Certain other minor modifications to the credit agreement were also made. The Company incurred $1.2 million in fees and transaction costs in connection with this amendment.

See also May 2013 Amendment of Senior Credit Facilities below.

Terms of Senior Credit Facilities as of March 31, 2013. The revolving credit facility provides for total available borrowings of up to $400.0 million, reduced by outstanding letters of credit, and further restricted by a specific leverage ratio. As of March 31, 2013, the Company had the ability to borrow an additional $56.8 million under the terms of the revolving credit agreement. The revolving credit facility bears interest at LIBOR plus 2.50% or at an index rate, as defined in the credit agreement, plus 1.50%, and matures on August 31, 2016. Interest is payable on the individual maturity dates for each LIBOR-based borrowing and monthly on index rate-based borrowings. Any outstanding principal is due in its entirety on the maturity date.

The term loan facility also bears interest at LIBOR plus 2.50% or at the index rate plus 1.50% and also matures on August 31, 2016. The term loan facility requires quarterly principal payments of $3.8 million, with a final payment of $225.0 million due on the maturity date. Once repaid, principal under the term loan facility may not be re-borrowed.

The amended and restated senior credit facilities contain financial covenants, including as of March 31, 2013:


•	Minimum fixed charge coverage ratio of 1.15, defined as earnings before interest, taxes, depreciation, amortization, and certain adjustments defined in the credit agreement (“Adjusted EBITDA”) divided by cash payments for interest, taxes, capital expenditures, scheduled debt principal payments, and certain other items, calculated on a trailing twelve-month basis.


•	Maximum leverage ratio, defined as total debt divided by Adjusted EBITDA, calculated on a trailing twelve-month basis. The maximum leverage ratio is set at 4.00 through June 30, 2013, 3.75 through December 31, 2013, 3.50 through September 30, 2014, 3.25 through March 31, 2015, and 3.00 thereafter.

In addition, there are covenants, restrictions, or limitations relating to acquisitions, investments, loans and advances, indebtedness, dividends on our stock, the sale or repurchase of our stock, the sale of assets, and other categories. In the opinion of management, we were in compliance with all financial covenants as of March 31, 2013. Non-compliance with these covenants is an event of default under the terms of the credit agreement, and could result in severe limitations to our overall liquidity, and the term loan lenders could require immediate repayment of outstanding amounts, potentially requiring sale of a sufficient amount of our assets to repay the outstanding loans.

The amended and restated senior credit facilities may be prepaid at any time without penalty. There can also be additional mandatory repayment requirements related to the sale of Company assets, the issuance of stock under certain circumstances, or upon the Company’s annual generation of excess cash flow, as determined under the credit agreement. Our senior credit facility agreement does not contain any provisions that would require early payment due to any adverse change in our credit rating.

The senior credit facility debt is incurred by the Company's wholly-owned subsidiary, Blount, Inc. Blount International, Inc. and all of its domestic subsidiaries other than Blount, Inc. guarantee Blount, Inc.’s obligations under the senior credit facilities. The obligations under the senior credit facilities are collateralized by a first priority security interest in substantially all of the assets of Blount, Inc. and its domestic subsidiaries, as well as a pledge of all of Blount, Inc.’s capital stock held by Blount International, Inc. and all of the stock of domestic subsidiaries held by Blount, Inc. Blount, Inc. has also pledged 65% of the stock of its direct non-domestic subsidiaries as additional collateral.

May 2013 Amendment of Senior Credit Facilities. Effective May 3, 2013, the senior credit facilities were amended. The May 2013 amendment modified the minimum fixed charge coverage ratio covenant and the maximum leverage ratio covenant, as defined above, and certain other terms. The fixed charge coverage ratio was reset to 1.05 through September 30, 2013, 1.10 through December 31, 2013, and 1.15 thereafter. The maximum leverage ratio was reset to 4.60 through December 31, 2013, 4.35 through March 31, 2014, 4.25 through June 30, 2014, 4.00 through December 31, 2014, 3.75 through June 30, 2015, 3.50 through September 30, 2015, 3.25 through December 31, 2015, and 3.00 thereafter. The amendment also changed the borrowing rate to LIBOR plus 3.00%, or at an index rate, as defined in the credit agreement, plus 2.00%, if the Company's maximum leverage ratio is greater than or equal to 4.00 but less than 4.50, and LIBOR plus 3.50%, or at an index rate, as defined in the credit agreement, plus 2.50%, if the maximum leverage ratio is 4.50 or higher. The Company incurred $1.6 million in fees and transaction costs in connection with this amendment. The definition of Adjusted EBITDA was also amended, among other terms.

Debt and Capital Lease Obligation of PBL. In conjunction with the acquisition of PBL we assumed $13.5 million of PBL’s debt, consisting of current and long-term bank obligations, revolving credit facilities, and $0.6 million in capital lease obligations. As of December 31, 2012, we had repaid all of PBL’s bank debt.