Debt

Lease Fleet Financings

The Company, through its wholly-owned subsidiaries LLI and LLII, has from time to time entered into lease fleet financings in order to, among other things, support and grow its railcar leasing business.

In January 2015, the Company added a wholly-owned subsidiary, LLIII, through which it refinanced the lease fleet financing facilities referred to below. Below is a summary of our indebtedness as of December 31, 2014 and thus does not reflect the LLIII refinancing. See Note 23, Subsequent Events, for further discussion regarding this refinancing and the nature of this subsidiary.

Original term loan

In December 2012, LLI entered into a senior secured delayed draw term loan facility (Original Term Loan) secured by a portfolio of railcars, railcar leases, the receivables associated with those railcars and leases, and certain other assets of LLI. The Original Term Loan provided for an initial draw at closing (Initial Draw) and allowed for up to two additional draws. Upon closing, the Initial Draw was $98.4 million, net of fees and expenses.

During the first half of 2013, ARI made two additional draws amounting to $99.8 million in aggregate under the Original Term Loan, fully utilizing its capacity. The additional draws during 2013 resulted in proceeds received of $99.4 million, net of fees and expenses. As of December 31, 2013, the outstanding principal balance on the Original Term Loan, including the current portion, was $194.8 million. The Original Term Loan, which had a maturity date of February 27, 2018, bore interest at one-month LIBOR plus 2.5%, for a rate of 2.7% as of December 31, 2013.

January 2014 refinancing

In January 2014, LLI refinanced its Original Term Loan under an amended and restated credit agreement (Amended and Restated Credit Agreement) in order to, among other things, increase the aggregate borrowings available thereunder. In connection with the refinancing, LLI entered into a new senior secured term loan facility in an aggregate principal amount of $316.2 million, net of fees and expenses (Refinanced Term Loan). Of this amount, $194.2 million was used to refinance the Original Term Loan, resulting in net proceeds of $122.0 million. In conjunction with the refinancing, the Company incurred a $1.9 million loss, which is shown as loss on debt extinguishment on the consolidated statements of operations. This non-cash charge is related to the accelerated write-off of deferred debt issuance costs incurred in connection with the Original Term Loan. As of December 31, 2014, the outstanding principal balance on the Refinanced Term Loan, including the current portion, was $309.0 million.

The Refinanced Term Loan accrues interest at a rate per annum equal to the 1-month LIBOR rate plus 2.0%, for a rate of 2.2% as of December 31, 2014, subject to an alternative rate as set forth in the Amended and Restated Credit Agreement. The interest rate increases by 2.0% following certain events of default. Pursuant to the terms of the Original Term Loan and the Amended and Restated Credit Agreement, the Company has been required to maintain deposits in an interest reserve bank account equal to nine and seven months, respectively, of interest payments. As of both December 31, 2014 and 2013, the interest reserve amount was $3.9 million and included within 'Restricted cash' on the consolidated balance sheets. The Refinanced Term Loan may be prepaid at LLI's option at any time without premium or penalty (other than customary LIBOR breakage fees) prior to the final scheduled maturity of the Refinanced Term Loan, which is January 15, 2020.

LLI is required to maintain a loan to value ratio of at least 80% of the Net Aggregate Equipment Value, as defined in the Amended and Restated Credit Agreement. The Amended and Restated Credit Agreement contains certain representations, warranties, and affirmative and negative covenants applicable to ARI and/or LLI, which are customarily applicable to senior secured facilities. Key covenants include limitations on LLI's indebtedness, liens, investments, acquisitions, asset sales, redemption payments, and affiliate and extraordinary transactions; full cash sweep; covenants relating to the maintenance of LLI as a separate legal entity; financial and other reporting and periodic appraisals; maintenance of railcars, leases, and other assets; and LLI's compliance with a Debt Service Coverage Ratio (as defined in the Amended and Restated Credit Agreement) of 1.05 to 1.00, measured quarterly on a nine-month trailing basis, and subject to up to a 75 - 135 day cure period. The Company was in compliance with all of its covenants under the Refinanced Term Loan as of December 31, 2014.

The terms of the Amended and Restated Credit Agreement also provided LLI with the right, but not the obligation, within the 90 day period ended on October 15, 2014, to increase the amount of the Refinanced Term Loan in an aggregate additional amount not to exceed $100.0 million subject to the conditions set forth in the Amended and Restated Credit Agreement. LLI did not exercise this right.

October 2014 bridge financing

In October 2014, the Company, through its wholly-owned subsidiary, LLII, entered into a lease fleet financing facility for $100.0 million under a term loan agreement (LLII Term Loan) in order to support the growth of its leasing business. The LLII Term Loan is scheduled to mature in April 2015. As of December 31, 2014, the outstanding principal balance on the LLII Term Loan was $100.0 million and is classified in the consolidated balance sheets as 'Short-term debt, including current portion of long-term debt'.

Subject to the provisions of the LLII Term Loan, the principal borrowed thereunder (the Loan) accrues interest at a rate determined by reference to an index or, subject to certain circumstances, at a base rate. For the portion of the Loan accruing interest at a rate determined by reference to an index, (i) except during a period when the lender for such portion of the Loan is funding and maintaining such portion of the Loan through the issuance of or other financing arrangement in respect of commercial paper, the sum of LIBOR (as determined under the LLII Term Loan) for such period plus the Applicable Margin (described below), and (ii) during a period when the lender for such portion of the Loan is funding and maintaining such portion of the Loan through the issuance of or other financing arrangement in respect of commercial paper, the sum of the applicable commercial paper rate (the CP Rate as determined under the LLII Term Loan) plus the Applicable Margin (described below). From and including October 16, 2014 and through and including April 16, 2015, the Applicable Margin is equal to a rate per annum of 1.45%, for a rate of 1.7% as of December 31, 2014. Thereafter, the Applicable Margin increases to a rate per annum equal to 2.95%. The interest rate increases by 2.0% following certain defaults. For the portion of the Loan accruing interest at the base rate, the interest rate is the higher of the federal funds rate designated by the LLII Term Loan, plus 0.5%, or the prime rate designated by the LLII Term Loan. Principal and interest payments are due monthly, with any remaining balance payable on the scheduled maturity date, which is April 16, 2015.

The LLII Term Loan contains certain representations, warranties, and affirmative and negative covenants applicable to ARI and/or LLII, which are customarily applicable to senior secured facilities. Key covenants include limitations on LLII's indebtedness, liens, investments, acquisitions, asset sales, and affiliate and extraordinary transactions; full cash sweep; covenants relating to the maintenance of LLII as a separate legal entity; financial and other reporting and periodic appraisals; maintenance of railcars, leases, and other assets; and LLII's compliance with an 80% utilization covenant (as defined in the LLII Term Loan). The Company was in compliance with all of its covenants under the LLII Term Loan as of December 31, 2014.

Both the LLI and LLII lease fleet financings are obligations of the respective wholly-owned subsidiary, are generally non-recourse to ARI, and are secured by a first lien on substantially all assets of LLI and LLII, respectively, consisting of railcars, railcar leases, receivables and related assets, subject to limited exceptions. ARI has, however, entered into agreements containing certain representations, undertakings, and indemnities customary for asset sellers and parent companies in transactions of this type, and ARI is obligated to make any selections of transfers of railcars, railcar leases, receivables and related assets to be transferred to LLI and LLII without any adverse selection, to cause American Railcar Leasing LLC (ARL), as the manager, to maintain, lease, and re-lease LLI and LLII's equipment no less favorably than similar portfolios serviced by ARL, and to repurchase or replace certain railcars under certain conditions set forth in the respective loan documents.

As of December 31, 2014 and 2013, the net book value of the railcars that were pledged as part of the Lease Fleet Financings was $277.0 million and $216.7 million, respectively.

The future contractual minimum rental revenues related to the railcars pledged under all Lease Fleet Financings as of December 31, 2014 were as follows (in thousands).



2015	$	50,479
2016	49,248
2017	38,093
2018	26,462
2019	17,682
2020 and thereafter	24,892
Total	$	206,856

As of December 31, 2014, the principal payments remaining under the Refinanced Term Loan were as follows:



	Payments due by Period
	2015		2016		2017		2018		2019		Thereafter
	(in thousands)
Refinanced Term Loan	$	10,612	$	10,612	$	10,612	$	13,703	$	16,890	$	246,525

2007 Senior Unsecured Notes

In February 2007, the Company completed the offering of $275.0 million senior unsecured fixed rate notes, which were subsequently exchanged for registered notes in March 2007 (Notes). The Notes bore interest at a fixed interest rate of 7.5%.

On September 4, 2012, ARI completed a voluntary partial early redemption of $100.0 million of the Notes at a rate of 101.875% of the principal amount, plus any accrued and unpaid interest. In conjunction with the redemption, the Company incurred a $2.3 million loss, which is shown as loss on debt extinguishment on the consolidated statements of operations. This charge consists of $1.9 million related to the premium the Company paid on the redemption as well as $0.4 million related to the accelerated write-off of a portion of deferred debt issuance costs.

On March 1, 2013, ARI completed a voluntary redemption of the remaining $175.0 million of Notes outstanding at par, plus any accrued and unpaid interest. In conjunction with the redemption, the Company incurred a $0.4 million loss, which is shown as loss on debt extinguishment on the consolidated statements of operations. This non-cash charge is related to the accelerated write-off of the remaining portion of deferred debt issuance costs incurred in connection with the Notes.