3. Long-Term Debt

Long-term debt consisted of the following (in thousands):

	September 30,		December 31,
	2013		2012
Guitar Center
Senior secured asset-based revolving facility	$	165,000	$	—
Senior secured term loan	617,500		621,762
Obligations under capital leases, payable in monthly installments through 2014 and 2013, respectively	333		54
Senior unsecured notes	394,890		394,890
	1,177,723		1,016,706
Less current portion	6,764		5,941
Guitar Center long-term debt, net of current portion	1,170,959		1,010,765

Holdings
Senior unsecured PIK notes	434,889		564,673
Less current portion	—		129,784
Holdings long-term debt, net of current portion	434,889		434,889

Holdings consolidated long-term debt, net of current portion	$	1,605,848	$	1,445,654

Guitar Center long-term debt as of September 30, 2013 consisted of (1) a senior secured asset-based revolving facility, referred to as the asset-based facility, with a maximum availability of $373 million, of which $165 million was outstanding, (2) a senior secured term loan facility, referred to as the term loan, in an aggregate principal amount of $617.5 million and (3) senior unsecured notes, referred to as the senior notes, in an aggregate principal amount of $394.9 million.

Holdings long-term debt as of September 30, 2013 consisted of senior unsecured payment-in-kind notes, referred to as the senior PIK notes, in an aggregate principal amount of $434.9 million.

Asset-based facility

The maximum available borrowing amount for our asset-based facility is subject to a borrowing base, which is calculated monthly based on specified percentages of the value of eligible inventory, credit card receivables and trade receivables. As of September 30, 2013, the borrowing base was $322 million, which supported $165 million of outstanding borrowings, $9 million of outstanding letters of credit and $148 million of availability.

Our daily average borrowings on the asset-based facility were $84.1 million for the nine months ended September 30, 2013.

As of September 30, 2013, the weighted average interest rate for borrowings on the asset-based facility was 3.2%.

Term loan modification

In June 2013, we reached an agreement with our lenders to modify certain terms of the term loan credit agreement. The amendments included the following:

· with respect to the $611.2 million of outstanding principal, as of the modification date, that matures in April 2017, increased the pricing margin over LIBOR from 525 basis points to 600 basis points and increased the pricing margin over prime rate from 425 basis points to 500 basis points;

· amended the time period for a 1.0% prepayment premium to apply to a prepayment or re-pricing transaction occurring within one year of the modification date; and

· amended the maximum consolidated secured net leverage ratio covenant as follows:

4.35x from April 1, 2013 through September 30, 2013

4.0x from October 1, 2013 through December 31, 2014

3.75x from January 1, 2015 through September 30, 2015

3.0x from July 1, 2015 through maturity.

Additionally, we were not required to test the secured net leverage ratio as a maintenance covenant for the fiscal quarter ended June 30, 2013.

We paid the lenders an aggregate of $2.9 million in arrangement and consent fees as part of the transactions. Fees paid to lenders were capitalized as debt issuance costs and are included in other assets, net in our condensed consolidated balance sheets. We amortize debt issuance costs to interest expense over the term of the related debts, using the effective interest method. Fees and expenses paid to third parties, totaling $0.2 million, were expensed and are included in selling, general and administrative expenses in our condensed consolidated statements of comprehensive loss for the nine months ended September 30, 2013.

Guarantees and dividend restrictions

Guitar Center’s term loan, asset-based facility and senior notes are guaranteed by substantially all of its subsidiaries. The subsidiary guarantors are 100% owned, all of the guarantees are full and unconditional and joint and several and Guitar Center, Inc. has no assets or operations independent from its subsidiaries within the meaning of Regulation S-X, Rule 3-10. Any non-guarantor subsidiaries are minor.

For information about dividend restrictions among Holdings, Guitar Center and its guarantor subsidiaries, see Note 5 to the audited consolidated financial statements included in our annual report on Form 10-K for the year ended December 31, 2012.

Future maturities

Future maturities of long-term debt as of September 30, 2013 were as follows (in thousands):

	Guitar Center		Holdings		Holdings Consolidated
Remainder of 2013	$	23,138	$	—	$	23,138
2014	14,582		—		14,582
2015	6,500		—		6,500
2016	150,052		—		150,052
2017	983,451		—		983,451
2018	—		434,889		434,889
	$	1,177,723	$	434,889	$	1,612,612

The asset-based facility matured in October 2013 with respect to $50 million of the maximum borrowing amount and matures in February 2016 with respect to $323 million of the maximum borrowing amount. Of the $165 million outstanding borrowings as of September 30, 2013, $21 million matured in October 2013 and $144 million matures in February 2016. We refinanced outstanding borrowings that matured in October 2013 with extended borrowing commitments maturing in February 2016. Accordingly, the entire outstanding balance on the asset-based facility is classified as long-term debt in our condensed consolidated balance sheets.