12. Debt

The Company’s outstanding debt consisted of the following at December 31, 2016 and 2015:


	December 31,
(Dollars in thousands)	2016		2015
Margin Borrowing Facilities	$	66,646	$	75,646
7.75% Subordinated Notes due 2045		96,497		96,388

Total	$	163,143	$	172,034

Margin Borrowing Facilities

The Company has available two margin borrowing facilities. The borrowing rate for each facility is tied to LIBOR and was approximately 1.6% and 1.3% at December 31, 2016 and 2015, respectively. These facilities are due on demand. The borrowings are subject to maintenance margin, which is a minimum account balance that must be maintained. A decline in market conditions could require an additional deposit of collateral. As of December 31, 2016, approximately $85.9 million in securities were deposited as collateral to support borrowings. The amount borrowed against the margin accounts may fluctuate as routine investment transactions, such as dividends received, investment income received, maturities and pay-downs, impact cash balances. The margin facilities contain customary events of default, including, without limitation, insolvency, failure to make required payments, failure to comply with any representations or warranties, failure to adequately assure future performance, and failure of a guarantor to perform under its guarantee. The amount outstanding on the Company’s margin borrowing facilities was $66.6 million and $75.6 million as of December 31, 2016 and 2015, respectively.

The Company recorded interest expense related to the Margin Borrowing Facilities of approximately $1.0 million, $1.9 million, and $0.7 million for the years ended December 31, 2016, 2015, and 2014, respectively.

7.75% Subordinated Notes due 2045

On August 12, 2015, the Company issued $100.0 million in aggregate principal amount of its 2045 Subordinated Notes through an underwritten public offering.

The notes bear interest at an annual rate equal to 7.75%, payable quarterly in arrears on February 15, May 15, August 15, and November 15 of each year, commencing November 15, 2015. The notes mature on August 15, 2045. The Company has the right to redeem the notes in $25 increments, in whole or in part, on and after August 15, 2020, or on any interest payment date thereafter, at a redemption price equal to 100% of the principal amount of the notes being redeemed plus accrued and unpaid interest to, but not including, the date of redemption.

The notes are subordinated unsecured obligations and rank (i) senior to the Company’s existing and future capital stock, (ii) senior in right of payment to future junior subordinated debt, (iii) equally in right of payment with any unsecured, subordinated debt that the Company incurs in the future that ranks equally with the notes, and (iv) subordinate in right of payment to any of the Company’s existing and future senior debt. In addition, the notes are structurally subordinated to all existing and future indebtedness, liabilities and other obligations of the Company’s subsidiaries.

The subordinated notes do not require the maintenance of any financial ratios or specified levels of net worth or liquidity, and do not contain provisions that would afford holders of the subordinated notes protection in the event of a sudden and dramatic decline in the Company’s credit quality resulting from any highly leveraged transaction, reorganization, restructuring, merger or similar transaction involving the Company that may adversely affect holders. The subordinated notes do not restrict the Company in any way, now or in the future, from incurring additional indebtedness, including senior indebtedness that would rank senior in right of payment to the subordinated notes. There is no right of acceleration of maturity of the subordinated notes in the case of default in the payment of principal, premium, if any, or interest on, the subordinated notes or in the performance of any other obligation of the Company under the notes or if the Company defaults on any other debt securities. Holders may accelerate payment of indebtedness on the notes only upon the Company’s bankruptcy, insolvency or reorganization. AM Best, which provides the Company’s industry rating, is giving the Company a 30% equity credit on the notes due to their 30 year maturity, as opposed to treating the notes entirely as debt.

The Company incurred $3.7 million in deferred issuance costs associated with the notes, which is being amortized over the term of the notes. Interest expense, including amortization of deferred issuance costs, recognized on the notes was $7.9 million and $3.0 million for the years ended December 31, 2016 and 2015, respectively.

The following table represents the amounts recorded for the 7.75% subordinated notes as of December 31, 2016 and 2015:


	December 31, 2016
	Outstanding Principal		Unamortized Debt Issuance Costs			Net Carrying Amount
7.75% Subordinated Notes due 2045	$	100,000	$	(3,503	)	$	96,497


	December 31, 2015
	Outstanding Principal		Unamortized Debt Issuance Costs			Net Carrying Amount
7.75% Subordinated Notes due 2045	$	100,000	$	(3,612	)	$	96,388