Long-Term Debt

The credit agreement, dated as of December 7, 2012 (as amended), by and among the Company, Wesco Aircraft Hardware (the “Borrower”) and the lenders and agents party thereto, which governs our senior secured credit facilities, provides for (1) a $400.0 million senior secured term loan A facility (the “term loan A facility”), (2) a $180.0 million revolving facility (the “revolving facility”), and (3) a $525.0 million senior secured term loan B facility (the “term loan B facility”). We refer to term loan A facility, the revolving facility and the term loan B facility, together, as the “Credit Facilities.”

On March 28, 2017, we entered into the Fifth Amendment (the “Fifth Amendment”) to our credit agreement (as amended prior to the Fifth Amendment, the “Credit Agreement”; the Credit Agreement, as amended by the Fifth Amendment, the “Amended Credit Agreement”).

The Fifth Amendment modified the Credit Agreement to reduce the maximum amount permitted to be incurred under a Capped Incremental Facility (as such term is defined in the Amended Credit Agreement) from $150.0 million to $75.0 million, unless the Consolidated Total Leverage Ratio (as such term is defined in the Amended Credit Agreement), after giving effect to the incurrence of any incremental loans or commitments and the use of proceeds thereof, on a pro forma basis, would be less than or equal to 3.50, in which case the Capped Incremental Facility will remain at $150.0 million.

The Fifth Amendment also modified the Credit Agreement to (a) increase the highest possible interest rate margin applicable to loans under the term loan A facility and loans and commitments under the revolving facility from 2.75% to 3.00% for Eurocurrency loans and from 1.75% to 2.00% for Alternate Base Rate (“ABR”) loans and (b) increase the Consolidated Total Leverage Ratio levels in the financial covenant set forth in the Credit Agreement to a maximum of 4.50 for the quarters ending June 30, 2017 and September 30, 2017, with step-downs to 4.25 for the quarters ending December 31, 2017 and March 31, 2018; 4.00 for the quarters ending June 30, 2018 and September 30, 2018; 3.75 for the quarters ending December 31, 2018 and March 31, 2019; and 3.50 for the quarter ending June 30, 2019 and thereafter.

Long-term debt consists of the following (in thousands):



	June 30, 2017									September 30, 2016
	Principal Amount			Deferred Financing Costs			Carrying Amount			Principal Amount		Deferred Financing Costs			Carrying Amount
Term loan A facility	$	385,000		$	(8,035	)	$	376,965		$	401,344	$	(2,247	)	$	399,097
Term loan B facility	440,562			(4,466		)	436,096			440,562		(5,380		)	435,182
Less: current portion	(20,000		)	—			(20,000		)	—		—			—
Non-current portion	$	805,562		$	(12,501	)	$	793,061		$	841,906	$	(7,627	)	$	834,279

During the nine months ended June 30, 2017, we made three required quarterly payments totaling $15.0 million and a voluntary prepayment of $1.3 million on our term loan A facility and two voluntary prepayments totaling $12.0 million on our borrowings under the revolving facility. As of June 30, 2017, $48.0 million of indebtedness was outstanding and $132.0 million was available for borrowing under the revolving facility, of which we could use up to $39.3 million to fund our operating and investing activities without breaching any covenants contained in the Amended Credit Agreement.

The interest rate for the term loan A facility is based on our Consolidated Total Leverage Ratio as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The term loan A facility amortizes in equal quarterly installments of 1.25% of the original principal amount of $400.0 million with the balance due on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of June 30, 2017, the interest rate for borrowings under the term loan A facility was 4.23%, which approximated the effective interest rate.

The interest rate for the term loan B facility has a margin of 2.50% per annum for Eurocurrency loans (subject to a minimum Eurocurrency rate floor of 0.75% per annum) or 1.50% per annum for ABR loans (subject to a minimum ABR floor of 1.75% per annum). The term loan B facility amortizes in equal quarterly installments of 0.25% of the original principal amount of $525.0 million, with the balance due at maturity on February 28, 2021. As of June 30, 2017, the interest rate for borrowings under the term loan B facility was 3.8%, which approximated the effective interest rate. In July 2015, we entered into interest rate swap agreements relating to this indebtedness, which are described in greater detail in Note 5 above.

The interest rate for the revolving facility is based on our Consolidated Total Leverage Ratio as determined in the most recently delivered financial statements, with the respective margins ranging from 2.00% to 3.00% for Eurocurrency loans and 1.00% to 2.00% for ABR loans. The revolving facility expires on the earlier of (i) 90 days before the maturity of the term loan B facility, and (ii) October 4, 2021. As of June 30, 2017, the weighted-average interest rate for borrowings under the revolving facility was 4.13%.

As a result of the Fourth Amendment to our Credit Agreement on October 4, 2016, we incurred $10.5 million in fees that were capitalized, $7.2 million of which was related to the term loan A facility and $3.3 million of which was related to the revolving facility. Of the $3.4 million of the unamortized deferred financing costs related to the Credit Agreement prior to the Fourth Amendment, $2.3 million was written off as debt extinguishment loss in the nine months ended June 30, 2017, which was included in interest expense for the period. As a result of the Fifth Amendment to our Credit Agreement on March 28, 2017, we incurred $2.3 million in fees that were capitalized, $1.6 million of which was related to the term loan A facility and $0.7 million of which was related to the revolving facility. The deferred financing costs of term loan B were not impacted by the Fourth Amendment or Fifth Amendment. The following table summarizes the total deferred financing costs for the term loan A facility, the term loan B facility and the revolving facility, which will be amortized over their remaining terms.



	Term Loan A Facility			Term Loan B Facility			Revolving Facility			Total
Deferred financing costs as of September 30, 2016	$	2,247		$	5,378		$	1,120		$	8,745
Write off for the Fourth Amendment	(1,769		)	—			(553		)	(2,322		)
Deferred financing costs for the Fourth Amendment	7,215			—			3,247			10,462
Deferred financing costs for the Fifth Amendment	1,617			—			719			2,336
Amortization of deferred financing costs	(1,275		)	(912		)	(627		)	(2,814		)
Deferred financing costs as of June 30, 2017	$	8,035		$	4,466		$	3,906		$	16,407

Our borrowings under the Credit Facilities are guaranteed by us and all of our direct and indirect, wholly-owned, domestic restricted subsidiaries (subject to certain exceptions) and secured by a first lien on substantially all of our assets and the assets of our guarantor subsidiaries, including capital stock of the subsidiaries (in each case, subject to certain exceptions).

Our borrowings under the Credit Facilities are subject to a financial covenant based upon our Consolidated Total Leverage Ratio with the maximum ratio set at 4.50 for the three months ended June 30, 2017. The Amended Credit Agreement also contains customary negative covenants, including restrictions on our and our restricted subsidiaries’ ability to merge and consolidate with other companies, incur indebtedness, grant liens or security interests on assets, make acquisitions, loans, advances or investments, pay dividends, sell or otherwise transfer assets, optionally prepay or modify terms of any junior indebtedness or enter into transactions with affiliates. We were in compliance with all of the foregoing covenants, and our Consolidated Total Leverage Ratio was 4.29 as of June 30, 2017.

As of June 30, 2017, our subsidiary, Wesco Aircraft Europe, Ltd, has available a £7.0 million ($9.1 million based on the June 30, 2017 exchange rate) line of credit that automatically renews annually on October 1 (the “UK line of credit”). The UK line of credit bears interest based on the base rate plus an applicable margin of 1.65%. As of June 30, 2017, the full £7.0 million was available for borrowing under the UK line of credit without breaching any covenants contained in the agreements governing our indebtedness, provided such borrowing, combined with borrowings under the Credit Facilities, does not cause us to exceed the maximum Consolidated Total Leverage Ratio.