Debt

LLI, LLII and LLIII Lease Fleet Financings

From time to time, the Company, through its wholly-owned subsidiaries LLI, LLII and LLIII, has entered into lease fleet financings in order to, among other things, support and grow its railcar leasing business. The 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 the subject assets of the respective subsidiary, 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, LLII and LLIII without any adverse selection, to cause American Railcar Leasing LLC (ARL), as the manager, to maintain, lease, and re-lease LLI's, LLII's and LLIII'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. See Note 19, Related Party Transactions, for further discussion regarding these agreements with ARL.

December 2012 lease fleet financing

In December 2012, LLI entered into a senior secured delayed draw term loan facility (Original Term Loan). 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. 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 lease fleet refinancing

In January 2014, LLI refinanced its Original Term Loan under an amended and restated credit agreement (Amended and Restated Credit Agreement). 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 accrued 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. Pursuant to the terms of the Amended and Restated Credit Agreement, the Company was required to maintain deposits in an interest reserve bank account equal to seven months of interest payments. As of December 31, 2014, the interest reserve amount was $3.9 million and included within 'Restricted cash' on the consolidated balance sheet.

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 railcar leasing business. The LLII Term Loan was 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 was classified in the consolidated balance sheet as 'Short-term debt, including current portion of long-term debt'.

Subject to the provisions of the LLII Term Loan, the principal borrowed thereunder accrued interest at a rate determined by reference to an index or, subject to certain circumstances, at a base rate. The Applicable Margin was equal to a rate per annum of 1.45%, for a rate of 1.7% as of December 31, 2014.

January 2015 private placement notes

In January 2015, LLIII issued $625.5 million in aggregate principal amount of notes pursuant to an Indenture. The notes are fixed rate secured railcar equipment notes bearing interest at a rate of 2.98% per annum for the Class A-1 Notes and 4.06% per annum for the Class A-2 Notes (collectively, the Notes), each payable monthly. Of the aggregate principal amount, $408.5 million was used to refinance the LLI and LLII lease fleet financing facilities, resulting in net proceeds of $211.6 million. In conjunction with the refinancing, the Company incurred a $2.1 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 LLI and LLII lease fleet financings. As of December 31, 2015, there were $226.3 million and $375.5 million of Class A-1 and Class A-2 notes outstanding, respectively. The Notes have a legal final maturity date of January 17, 2045 and an expected principal repayment date of January 15, 2025.

While the legal final maturity date of the Notes is January 17, 2045, cash flows from LLIII's assets will be applied, pursuant to the flow of funds provisions of the Indenture, so as to achieve monthly targeted principal balances. Also, under the flow of funds provisions of the Indenture, early amortization of the Notes may be required in certain circumstances. Pursuant to the terms of the Indenture, the Company is required to maintain deposits in a liquidity reserve bank account equal to nine months of interest payments. As of December 31, 2015, the liquidity reserve amount was $16.9 million, and included within 'Restricted cash' on the consolidated balance sheets.

LLIII can prepay or redeem the Class A-1 Notes, in whole or in part, on any payment date and the Class A-2 Notes, in whole or in part, on any payment date occurring on or after January 16, 2018.

The Indenture contains covenants which limit, among other things, LLIII's ability to incur additional indebtedness or encumbrances on its assets, pay dividends or make distributions, make certain investments, perform its business other than specified activities, enter into certain types of transactions with its affiliates, and sell assets or consolidate or merge with or into other companies. These covenants are subject to a number of exceptions and qualifications. The Company was in compliance with all of these covenants as of December 31, 2015.

As of December 31, 2015, the principal payments remaining on the Notes were as follows:



	Payments due by Period
	2016		2017		2018		2019		2020		Thereafter
	(in thousands)
Notes	$	25,783	$	25,588	$	25,590	$	25,507	$	26,354	$	472,974

ARI Lease fleet financings

December 2015 revolving credit facility

In December 2015, the Company completed a financing of its railcar lease fleet with availability of up to $200.0 million under a credit agreement (2015 Credit Agreement). See 'Liquidity and Capital Resources' section for further discussion regarding the incremental borrowing provision under the 2015 Credit Agreement. The initial Revolving Loan obtained at closing amounted to approximately $99.5 million, net of fees and expenses. In February 2016, we repaid amounts outstanding under the Revolving Loan in full and as of the date of this report, the Company has borrowing availability of $200.0 million under this facility.

The Revolving Loan accrues interest at a rate per annum equal to Adjusted LIBOR (as defined in the 2015 Credit Agreement) for the applicable interest period, plus 1.45%, for a rate of 1.9% as of December 31, 2015. Interest is payable on the last day of each 1, 2, or 3-month interest period, the day of any mandatory prepayment, and the maturity date.

The Revolving Loan and the other obligations under the 2015 Credit Agreement are fully recourse to the Company and are secured by a first lien and security interest on certain specified railcars (together with specified replacement railcars), related leases, related receivables and related assets, subject to limited exceptions, a controlled bank account, and following an election by the Company (the Election), the applicable railcar management agreement with ARL. See Note 19, Related Party Transactions, for further discussion regarding this agreement with ARL.

Subject to the provisions of the 2015 Credit Agreement, the Revolving Loan may be borrowed and reborrowed until the maturity date. The Revolving Loan may be prepaid at the Company’s option at any time without premium or penalty (other than customary LIBOR breakage fees and customary reimbursement of increased costs). The final scheduled maturity of the Revolving Loan is December 10, 2018, or such earlier date as provided in the 2015 Credit Agreement. The Company was in compliance with all of its covenants under the 2015 Credit Agreement as of December 31, 2015.

The future contractual minimum rental revenues related to the railcars pledged under all Lease Fleet Financings as of December 31, 2015 were as follows (in thousands).



2016	$	83,293
2017	68,352
2018	55,015
2019	39,609
2020	21,079
2021 and thereafter	22,528
Total	$	289,876

As of December 31, 2015 and December 31, 2014, the net book value of the railcars that were pledged as part of the Lease Fleet Financings was $563.7 million and $277.0 million, respectively.

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 (2007 Notes). The 2007 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 2007 Notes and on March 1, 2013, ARI completed a voluntary redemption of the remaining $175.0 million of 2007 Notes outstanding at par, plus any accrued and unpaid interest. In conjunction with the 2013 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 2007 Notes.