Debt and Short-Term Borrowings

3 Months Ended

Mar. 31, 2020

Total debt at March 31, 2020 and December 31, 2019 follows:



(In thousands)	March 31, 2020		December 31, 2019
2023 Term A Loan paying interest at a variable interest rate (LIBOR plus applicable margin⁽¹⁾⁽²⁾)	$	196,693	$	207,261
2024 Term B Loan paying interest at a variable interest rate (LIBOR plus applicable margin⁽¹⁾⁽³⁾)	308,401		317,936
Note payable due April 30, 2021⁽¹⁾	143		175
Note payable due January 1, 2022⁽¹⁾	1,339		2,231
Total debt	$	506,576	$	527,603


(1)	Net of unaccreted discount and unamortized debt issue costs, as applicable.


(2)	Applicable margin of 2.00% at March 31, 2020 and December 31, 2019.


(3)	Subject to a minimum rate ("LIBOR floor") of 0% plus applicable margin of 3.50% at March 31, 2020 and December 31, 2019.

Secured Credit Facilities

On November 27, 2018, EVERTEC and EVERTEC Group (“Borrower”) entered into a credit agreement providing for the secured credit facilities, consisting of a $220.0 million term loan A facility that matures on November 27, 2023 (the “2023 Term A Loan"), a $325.0 million term loan B facility that matures on November 27, 2024 (the “2024 Term B Loan”), and a $125.0 million revolving credit facility (the “Revolving Facility”) that matures on November 27, 2023, with a syndicate of lenders and Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent, swingline lender and line of credit issuer (collectively the “2018 Credit Agreement”).

The 2018 Credit Agreement requires mandatory repayment of outstanding principal balances based on a percentage of excess cash flow, provided that no such payment shall be due if the resulting amount of the excess cash flow multiplied by the applicable percentage is less than $10 million. On March 5, 2020, the Company repaid $17.0 million as a result of excess cash flows for the year ended December 31, 2019.

The unpaid principal balance at March 31, 2020 of the 2023 Term A Loan and the 2024 Term B Loan was $198.3 million and $311.9 million, respectively. The additional borrowing capacity under our Revolving Facility at March 31, 2020 was $116.9 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Notes Payable

In December 2019, EVERTEC Group entered into two non-interest bearing financing agreements amounting to $2.4 million to purchase software and maintenance. As of March 31, 2020 and December 31, 2019, the outstanding principal balance of the notes payable was $1.5 million and $2.4 million, respectively. The current portion of these notes, which totaled $0.8 million at March 31, 2020, is included in accounts payable and the long-term portion is included in other long-term liabilities in the Company's unaudited condensed consolidated balance sheet.

Interest Rate Swaps

As of March 31, 2020, the Company has two interest rate swap agreements, entered into in December 2015 and December 2018, which convert a portion of the interest rate payments on the Company's 2024 Term B Loan from variable to fixed:



Swap Agreement	Effective date	Maturity Date	Notional Amount	Variable Rate	Fixed Rate
2015 Swap	January 2017	April 2020	$200 million	1-month LIBOR	1.9225%
2018 Swap	April 2020	November 2024	$250 million	1-month LIBOR	2.89%

The Company has accounted for these agreements as cash flow hedges.

As of March 31, 2020 and December 31, 2019, the carrying amount of derivatives included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheets was $27.4 million and $14.5 million, respectively. The fair value of these derivatives is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 for disclosure of losses recorded on cash flow hedging activities.

During the three months ended March 31, 2020, the Company reclassified gains of $0.2 million from accumulated other comprehensive loss into interest expense. Based on current LIBOR rates, the Company expects to reclassify losses of $4.7 million from accumulated other comprehensive loss into interest expense over the next 12 months.

The cash flow hedges are considered highly effective.