Note 9 — Loan Facilities

On October 12, 2017, as part of a recapitalization plan, the Company entered into a credit agreement with a syndicate of lenders, who lent in face amount $350.0 million under a five-year secured term loan facility (“Term Loan Facility”) and provided a three-year secured revolving credit facility (“Revolving Loan Facility”) for $20.0 million, which was undrawn at closing. The Term Loan Facility and the Revolving Loan Facility together are referred to as the “Secured Loan Facilities”. In conjunction with the borrowings under the Secured Loan Facilities, the Company incurred expenses of $11.5 million, consisting of original issue discount of $1.75 million and deferred financing costs of $9.8 million, which have been recorded as a reduction in the carrying value of the Term Loan Facility in the consolidated statements of financial position. These costs are being amortized into interest expense over the lives of the obligations. For the years ended December 31, 2018 and 2017, the Company incurred incremental interest expense of $2.3 million and $0.6 million, respectively, related to the amortization of these costs. See “Note 10 — Equity”.



	As of December 31,
	2018			2017
	(in thousands)
Term Loan Facility carrying value	$	319,479		$	339,048
Unamortized discount	1,313			1,663
Unamortized debt issuance costs	7,333			9,289
Total Term Loan Facility	328,125			350,000
Current maturities of Term Loan Facility	(35,000		)	(21,875		)
Total long-term debt	$	293,125		$	328,125

The carrying value of the Term Loan Facility, excluding the unamortized debt issuance costs and discount that are presented as a reduction to the debt principal balance, approximated the fair value. As the borrowings are not accounted for at fair value, their fair value is not included in the Company’s fair value hierarchy in “Note 7 — Fair Value of Financial Instruments,” however, had these borrowings been included, they would have been classified in Level 2.

Borrowings under the Secured Loan Facilities bear interest at either the U.S. Prime Rate plus 2.75% or LIBOR plus 3.75%. Borrowings under the Secured Loan Facilities had a weighted average interest rate for the year ended December 31, 2018 and the period outstanding in 2017 of approximately 5.8% and 5.1%, respectively (with the borrowing rate ranging from 5.1% to 6.6% and from 5.0% to 5.3%, respectively).

The Term Loan Facility required quarterly principal amortization payments of $4.375 million, which began on March 31, 2018 and continued through September 30, 2018. Beginning for the quarter ended December 31, 2018, the Term Loan Facility requires quarterly principal amortization payments of $8.75 million (or $35.0 million annually) which will continue through September 30, 2022, with the remaining balance of the Term Loan Facility due at maturity on October 12, 2022. In addition, beginning for the year ended December 31, 2018, the Company may be required to make annual repayments of principal on the Term Loan Facility within ninety days of year-end of up to 50% of its annual excess cash flow as defined in the credit agreement based on a calculation of net leverage. For the year ended December 31, 2018, based upon the Company’s financial results for 2018 an excess cash flow payment was not required. The Company is also required to repay certain amounts of the Term Loan Facility in connection with the non-ordinary course sale of assets, receipt of insurance proceeds, and the issuance of debt obligations, subject to certain exceptions. At December 31, 2018 and 2017, $328.1 million and $350.0 million were outstanding on the Term Loan Facility, respectively. No amounts were outstanding under the Revolving Loan Facility.

During the year ended December 31, 2018, the Company made mandatory quarterly principal payments of $21.9 million. All mandatory repayments of the Term Loan Facility will be applied without penalty or premium. Voluntary prepayments of borrowings under the Term Loan Facility will be permitted. In the event that all or any portion of the Term Loan Facility is prepaid or refinanced or repriced through any amendment prior to April 12, 2019, such prepayment, refinancing, or repricing will be at 101.0% of the principal amount so prepaid, refinanced or repriced.

The Term Loan Facility and Revolving Loan Facility are both guaranteed by the Company’s existing and subsequently acquired or organized wholly-owned U.S. restricted subsidiaries (excluding any registered broker-dealers) and secured with a first priority perfected security interest in certain domestic assets, 100% of the capital stock of each U.S. subsidiary and 65% of the capital stock of each non-U.S. subsidiary, subject to certain exclusions. In particular, such security interests do not include any assets of regulated subsidiaries that are not permitted to be pledged by law, statute or regulation, including cash held by regulated subsidiaries and any other capital required to meet and maintain regulatory capital requirements. The credit facilities contain certain covenants that limit the Company’s ability above certain permitted amounts to incur additional indebtedness, make certain acquisitions, pay dividends and repurchase shares. The Term Loan Facility does not have financial covenants and the revolving loan facility is subject to a springing total net leverage ratio financial covenant, subject to certain step downs, if the Company’s borrowings under the Revolving Loan Facility exceed $12.5 million. The Company is also subject to certain other non-financial covenants. At December 31, 2018 and 2017, the Company was compliant with all loan covenants.

In conjunction with the borrowing of the Term Loan Facility in October 2017, the Company used a portion of the proceeds to repay in full outstanding borrowings of $83.8 million under the previously existing revolving bank loan facility plus accrued interest. Interest on the previous revolving bank loan facility was based on the higher of 3.50% or the U.S. Prime Rate (4.25% at the time of repayment) and was payable monthly. The weighted average daily borrowings outstanding under the previous revolving bank loan facility for the portion of the year the obligation was outstanding were approximately $65.3 million for the year ended December 31, 2017.

In connection with the Acquisition in April 2015, the Company borrowed $45.0 million, which was comprised of two bank term loan facilities, each in an original principal amount of $22.5 million. One bank term loan facility, which bore interest at the U.S. Prime Rate plus 0.75%, was repaid in two equal installments, one in June 2015 and the other in April 2016. The second bank term loan facility, which bore interest at the Prime Rate plus one and one-quarter percent (1.25%) per annum, which interest rate was to be reduced to the Prime Rate plus three-quarters of one percent (0.75%) per annum when the amount outstanding was $7.5 million or less, had a maturity date of April 30, 2018 and was payable in four equal semi-annual installments beginning on October 31, 2016. In 2016, a principal payment of $5.625 million was made on the second bank term loan facility. In 2017, prior to the drawdown of the Term Loan Facility, the Company repaid the outstanding balance of the bank term loan of $16.9 million in full satisfaction of the remaining tranche of the bank term loan facility used to fund the Acquisition. There were no prepayment penalties for the early repayment of the bank term loan facilities.

The weighted average interest rate of the previous debt facilities was 4.2% and 3.9% for the portion of the year the obligations were outstanding in 2017 and for the year ended December 31, 2016, respectively.