4. Debt

2015 Credit Facility

On June 25, 2015, the Company entered into the 2015 Credit Agreement. The 2015 Credit Agreement provides for the 2015 Term Loan and the 2015 Revolver. The 2015 Credit Agreement also provides for the issuance of letters of credit and the provision of swingline loans under the 2015 Revolver, subject to a $15.0 million sublimit for letters of credit and a $5.0 million sublimit for swingline loans. The Company used $80.0 million of proceeds from the 2015 Term Loan to repay the 2011 Term Loan. On July 24, 2015, the Company funded the redemption of the Notes using the proceeds from the remaining $245.0 million under the 2015 Term Loan and $25.0 million under the 2015 Revolver along with cash on hand.

The 2015 Credit Agreement provides for the 2015 Term Loan, a five year $325.0 million senior secured term loan, the 2015 Revolver, a five year $100.0 million senior secured revolver, and the issuance of letters of credit and the provision of swingline loans under the 2015 Revolver, subject to a $15.0 million sublimit for letters of credit and a $5.0 million sublimit for swingline loans. The Company’s subsidiaries (the “Guarantors”) have guaranteed the Company’s obligations under the 2015 Credit Agreement. The 2015 Credit Agreement is collateralized by a first priority interest in substantially all of the present and future assets of the Company and the Guarantors, other than their interests in the Hallmark trademarks and associated rights.

The Company must elect Eurodollar or base rate loans prior to borrowing. Eurodollar loans will bear interest at the adjusted LIBO rate (with that rate not to be deemed to be below 0.00%), plus an interest margin ranging from 1.50% to 2.25%, depending on the Company’s Consolidated Leverage Ratio (as defined in the 2015 Credit Agreement). All base rate loans will bear interest at the alternate base rate (as defined in the 2015 Credit Agreement), plus an interest margin ranging from 0.50% to 1.25%, depending on the Company’s Consolidated Leverage Ratio. The adjusted LIBO rate is based on the three month LIBOR.

Commitment fees are payable on the unused credit commitment at a rate ranging from 0.25% to 0.40%, depending on the Company’s Consolidated Leverage Ratio.

The Company is required to make prepayments under the 2015 Term Loan in amounts equal to (1) 50% of excess cash flow, as defined in the 2015 Credit Agreement, of the Company for the six months ending December 31, 2015, and for each year thereafter, which percentage will be reduced to 25% if the Consolidated Leverage Ratio is equal to or less than 3.00 to 1.00 but greater than 2.00 to 1.00, and 0% if the Consolidated Leverage Ratio is equal to or less than 2.00 to 1; (2) 100% of net cash proceeds of dispositions or casualty events if the Company has not invested such proceeds within one year after the occurrence of the disposition or casualty event; and (3) 100% of net cash proceeds from the issuance of indebtedness not otherwise permitted by the 2015 Credit Agreement.

The covenants in the 2015 Credit Agreement limit the ability of the Company and certain of its subsidiaries to, among other things: (1) incur indebtedness; (2) create or permit liens on assets; (3) pay certain dividends or make certain stock repurchases and redemptions and other restricted payments; (4) make certain investments; (5) prepay indebtedness; (6) enter into certain transactions with its affiliates; (7) dispose of assets; (8) merge or consolidate; (9) enter into new unrelated lines of business; and (10) enter into sale and leaseback transactions. The 2015 Credit Agreement also requires compliance by the Company with a Consolidated Leverage Ratio test and a Consolidated Secured Leverage Ratio test (as defined in the 2015 Credit Agreement).

The Company was in compliance with its covenants under the 2015 Credit Agreement as of March 31, 2016.

At December 31, 2015, the outstanding balance under the 2015 Term Loan, net of unamortized transaction costs of $2.6 million, was $322.4 million. At March 31, 2016, the outstanding balance under the 2015 Term Loan, net of unamortized transaction costs of $2.4 million, was $322.6 million. The Company made an interest payment of $1.8 million under the 2015 Term Loan during the three months ended March 31, 2016.

Interest expense under the 2015 Term Loan was $2.1 million for the three months ended March 31, 2016. The effective interest rate was approximately 2.63% during the three months ended March 31, 2016. The weighted average nominal interest rate was approximately 2.34% during the three months ended March 31, 2016.

The 2015 Revolver was not in place during the three months ended March 31, 2015. Commitment fee expense for the three month periods ended March 31, 2016, was $75,000.

At both December 31, 2015 and March 31, 2016, one letter of credit in the amount of $909,000 was outstanding.

2011 Credit Facility

Pursuant to the 2011 Credit Agreement, the Company entered into the 2011 Term Loan and the 2011 Revolver.

The Company made principal payments of $20.0 million under the 2011 Term Loan during the three months ended March 31, 2015.

Interest expense under the 2011 Term Loan was $1.5 million for the three months ended March 31, 2015. The effective interest rate was approximately 5.25% during the three months ended March 31, 2015. The weighted average nominal interest rate was approximately 4.05% during the three months ended March 31, 2015.

Interest expense under the 2011 Revolver for the three months ended March 31, 2015 was $0.

Commitment fees on the 2011 Revolver were payable on the unused revolving credit commitment at the rate of 0.50% per annum, payable quarterly. Commitment fee expense for the three-month period ended March 31, 2015, was $37,000.

The Notes

Interest expense under the Notes was $7.3 million for the three months ended March 31, 2015. After giving effect to the amortization of associated debt issuance costs, the effective interest rate of the Notes was approximately 11.0% during the three months ended March 31, 2015.

Debt Service Requirements

Debt service requirements, including estimated future interest and premium, for each of the five years subsequent to March 31, 2016 and the period thereafter, are as follows:


	Payments Due by Period
	Total		Year 1		Year 2		Year 3		Year 4		Year 5
	(In thousands)
Term Loan, due June 25, 2020	$	355,702	$	23,982	$	23,608	$	31,295	$	38,826	$	237,991

Guarantees

Because Crown Media Holdings has no independent assets or operations, the guarantees by the Guarantors under the 2015 Credit Agreement are full and unconditional, as well as joint and several. All subsidiaries of Crown Media Holdings are Guarantors. The 2015 Credit Agreement imposes restrictions on the payment of dividends by Crown Media Holdings and the Guarantors.