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Loan Facilities
 9 Months Ended
Sep. 30, 2020
Debt Disclosure [Abstract]  
Loan Facilities Loan Facilities
In October 2017, as part of a recapitalization plan, the Company entered into a credit agreement with a syndicate of lenders, who lent a face amount of $350.0 million under a five-year secured term loan facility (“2017 Term Loan Facility”) and provided a three-year secured revolving credit facility (“Revolving Loan Facility”) for $20.0 million, which was undrawn at closing.
On April 12, 2019, the Company refinanced its 2017 Term Loan Facility with borrowings of $375.0 million from a new five-year secured term loan facility (“Term Loan Facility”). These borrowings were used to repay in full the $319.4 million outstanding principal balance of the 2017 Term Loan Facility, pay fees and expenses and resulted in net cash proceeds of $48.2 million, which increased the Company’s cash balance. Under the terms of the 2017 Term Loan Facility, the Company was eligible to repay, refinance or reprice the outstanding principal amount of the loan facility as of April 12, 2019 without any incremental premium or other charge.
Effective with the refinancing in April 2019, borrowings under the Term Loan Facility bear interest at either U.S. Prime plus 2.25% or LIBOR plus 3.25%, which represents a 50 basis point reduction from the applicable borrowing rates of the 2017 Term Loan Facility. Borrowings under the Term Loan Facility and 2017 Term Loan Facility had a weighted average interest rate for the nine months ended September 30, 2020 and September 30, 2019 of 4.0% and 5.9%, respectively.
The Term Loan Facility requires quarterly principal amortization payments of $4.7 million (or $18.8 million annually), from September 30, 2019 through March 31, 2024, with the remaining outstanding balance due at maturity on April 12, 2024. In addition, beginning for the year ended December 31, 2019, 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. The Company is also required to repay certain amounts in connection with the non-ordinary course sale of assets, receipt of insurance proceeds, and the issuance of debt obligations, subject to certain exceptions. For the year ended December 31, 2019, based upon the Company’s financial results for 2019 an excess cash flow payment was not required. The Revolving Loan Facility matured on October 12, 2020. During the three year period that the Revolving Loan Facility was outstanding, there were no drawings on it. Based on the Company’s current liquidity position and expected operating needs, manangement did not forecast any future needs for the facility and elected not to renew or extend it.
The Term Loan Facility is 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 and 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 which, for the avoidance of doubt, such security interest shall 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 facility contains 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 was 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 September 30, 2020, the Company was compliant with all loan covenants.
In conjunction with the refinancing of the 2017 Term Loan Facility in April 2019, the Company incurred fees of $5.7 million, of which $2.7 million was recorded as deferred financing costs and $3.0 million was expensed. In addition, as a result of the refinancing, $1.8 million of previously deferred fees, or fees in aggregate of $4.8 million, were charged to expense and recorded as interest expense in the condensed consolidated statements of operations. The deferred financing costs incurred in connection with the refinancing, along with the remaining unamortized costs from the 2017 Term Loan Facility which, as of the date of the refinancing, were $9.0 million, are being amortized into interest expense over the remaining life of the obligation and recorded as a reduction in the carrying value of the Term Loan Facility in the condensed consolidated statement of financial condition. The Company incurred incremental interest expense of $0.4 million related to the amortization of deferred financing costs for each of the three months ended September 30, 2020 and 2019 and incremental interest expense of $1.3 million and $1.5 million related to the amortization of such costs for the nine months ended September 30, 2020 and 2019, respectively.
As of September 30, 2020, the Term Loan Facility had a principal balance of $346.9 million and its carrying value was $340.6 million and no amounts were outstanding under the Revolving Loan Facility. At September 30, 2020, the fair value of the Term Loan Facility approximated its outstanding principal balance. As the borrowing is not accounted for at fair value, the fair value is not included in the Company’s fair value hierarchy in “Note 4 — Fair Value of Financial Instruments,” however, had the borrowing been included, it would have been classified in Level 2.
During the nine months ended September 30, 2020, the Company made aggregate principal payments on the Term Loan Facility of $18.8 million. Such payments were applied to and made in advance of the quarterly installments due in March, June, September and December 2020. All mandatory repayments of the Term Loan Facility are applied without penalty or premium. Effective April 14, 2020 all voluntary prepayments, including refinancing of all or part of the borrowings, under the Term Loan Facility are permitted to be made without penalty.