Borrowings

12 Months Ended

Dec. 31, 2019

Broker-Dealer Credit Facilities

The Company is a party to two secured credit facilities with a financial institution to finance overnight securities positions purchased as part of its ordinary course broker-dealer market making activities. One of the facilities (the “Uncommitted Facility”) is provided on an uncommitted basis with an aggregate borrowing limit of $200 million, which was subsequently increased to $300 million in January 2020, and is collateralized by the trading and deposit account of one of the Company’s broker-dealer subsidiaries maintained at the financial institution.

On November 3, 2017, the Company entered into the second credit facility (the “Committed Facility”) with the same financial institution for an aggregate borrowing limit of $500 million. The Committed Facility was subsequently amended and restated March 1, 2019 to increase the borrowing limit to $600 million and to enable a broker-dealer subsidiary of ITG as a borrower thereunder, and amended again on September 23, 2019 to adjust certain sublimits and required minimum total regulatory capital. The Committed Facility consists of two borrowing bases: Borrowing Base A Loan is to be used to finance the purchase and settlement of securities; Borrowing Base B Loan is to be used to fund margin deposit with the National Securities Clearing Corporation. Each of the broker-dealers has a sublimit under Borrowing Base A Loan, from $300 million to $600 million, which bears interest at the adjusted LIBOR or base rate plus 1.25% per annum. Each of the broker-dealers has a sublimit under Borrowing Base B Loan, from $100 million to $150 million, which bears interest at the adjusted LIBOR or base rate plus 2.50% per annum. A commitment fee of 0.50% per annum on the average daily unused portion of this facility is payable quarterly in arrears.

The following summarizes the Company’s broker-dealer credit facilities' carrying values, net of unamortized debt issuance costs, where applicable. These balances are included within Short-term borrowings on the Consolidated Statement of Financial Condition.



	At December 31, 2019
(in thousands)	Interest Rate	Financing Available		Borrowing Outstanding		Deferred Debt Issuance Cost			Outstanding Borrowings, net
Broker-dealer credit facilities:
Uncommitted facility	2.55%	$	200,000	$	30,000	$	(2,100	)	$	27,900
Committed facility	3.01%	600,000		—		—			—
		$	800,000	$	30,000	$	(2,100	)	$	27,900



	At December 31, 2018
(in thousands)	Interest Rate	Financing Available		Borrowing Outstanding		Deferred Debt Issuance Cost			Outstanding Borrowings, net
Broker-dealer credit facilities:
Uncommitted facility	3.40%	$	200,000	$	10,000	$	(832	)	$	9,168
Committed facility	3.75%	500,000		7,000		(1,040		)	5,960
		$	700,000	$	17,000	$	(1,872	)	$	15,128

The following summarizes interest expense for the broker-dealer facilities. Interest expense is included within Interest and dividends expense in the accompanying Consolidated Statements of Comprehensive Income.



	Years Ended December 31,
(in thousands)	2019		2018		2017
Broker-dealer credit facilities:
Uncommitted facility	$	1,591	$	1,794	$	1,667
Committed facility	454		306		52
	$	2,045	$	2,100	$	1,719

Short-Term Bank Loans

The Company’s international securities clearance and settlement activities are funded with operating cash or with short-term bank loans in the form of overdraft facilities. At December 31, 2019, there was $45.6 million outstanding under these facilities at a weighted average interest rate of approximately 4.5% associated with international settlement activities. These short-term bank loan balances are included within Short-term borrowings on the Consolidated Statement of Financial Condition.

Short-Term Credit Facilities

The Company maintains short-term credit facilities with various prime brokers and other financial institutions from which it receives execution or clearing services. The proceeds of these facilities are used to meet margin requirements associated with the products traded by the Company in the ordinary course, and amounts borrowed are collateralized by the Company’s trading accounts with the applicable financial institution.



	At December 31, 2019
	Weighted Average Interest Rate	Financing Available		Borrowing Outstanding
Short-Term Credit Facilities:
Short-term credit facilities (1)	4.22%	$	586,000	$	134,331
		$	586,000	$	134,331



	At December 31, 2018
	Weighted Average Interest Rate	Financing Available		Borrowing Outstanding
Short-Term Credit Facilities:
Short-term credit facilities (1)	5.03%	$	566,000	$	184,608
		$	566,000	$	184,608

(1) Outstanding borrowings are included with Receivables from/ Payables to broker-dealers and clearing organizations within the Consolidated Statements of Financial Condition.

Interest expense in relation to the facilities was approximately $6.6 million, $7.1 million, and $6.6 million for the years ended December 31, 2019, 2018 and 2017, respectively.

Long-Term Borrowings

The following summarizes the Company’s long-term borrowings, net of unamortized discount and debt issuance costs, where applicable:



		At December 31, 2019
(in thousands)	Maturity Date	Interest Rate	Outstanding Principal		Discount			Deferred Debt Issuance Cost			Outstanding Borrowings, net
Long-term borrowings:
First Lien Term Loan Facility	March 2026	5.20%	$	1,925,000	$	(6,795	)	$	(32,513	)	$	1,885,692
SBI bonds	January 2023	5.00%	32,225		—			(51		)	32,174
			$	1,957,225	$	(6,795	)	$	(32,564	)	$	1,917,866



		At December 31, 2018
(in thousands)	Maturity Date	Interest Rate	Outstanding Principal		Discount			Deferred Debt Issuance Cost			Outstanding Borrowings, net
Long-term borrowings:
Fourth Amended and Restated Credit Facility	December 2021	5.55%	$	400,000	$	(332	)	$	(6,704	)	$	392,964
Senior Secured Second Lien Notes	June 2022	6.75%	500,000		—			(17,811		)	482,189
SBI bonds	January 2020	5.00%	31,908		—			(24		)	31,884
			$	931,908	$	(332	)	$	(24,539	)	$	907,037

Credit Agreement

As described in Note 3 “ITG Acquisition”, in connection with the ITG Acquisition, Virtu Financial, VFH and the Acquisition Borrower entered into the Credit Agreement, with the lenders party thereto, Jefferies Finance LLC, as administrative agent and Jefferies Finance LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners.

The Credit Agreement provided (i) a senior secured first lien term loan (together with the Incremental Term Loans, as defined below; the “First Lien Term Loan Facility”) in an aggregate principal amount of $1,500 million, drawn in its entirety on the ITG Closing Date, with approximately $404.5 million borrowed by VFH to repay all amounts outstanding under the Existing Term Loan Facility (as defined below) and the remaining approximately $1,095 million borrowed by the Acquisition Borrower to finance the consideration and fees and expenses paid in connection with the ITG Acquisition, and (ii) a $50.0 million senior secured first lien revolving facility to VFH (the “First Lien Revolving Facility”), with a $5.0 million letter of credit subfacility and a $5.0 million swingline subfacility. After the ITG Closing Date, VFH assumed the obligations of the Acquisition Borrower in respect of the acquisition term loans.

On October 9, 2019 (the “Amendment Closing Date”), VFH entered into Amendment No. 1 (“Amendment No. 1”), which amended the Credit Agreement dated as of March 1, 2019 (as amended by Amendment No. 1, the “Amended Credit Agreement”) by and among VFH, Virtu Financial, the lenders party thereto, and Jefferies Finance, LLC, as administrative agent and collateral agent, to, among other things, provide for $525.0 million in aggregate principal amount of incremental term loans (the “Incremental Term Loans”), and amend the related collateral agreement. On the Amendment Closing Date, VFH borrowed the Incremental Term Loans and used the proceeds together with available cash to redeem all of the $500.0 million aggregate principal amount of the outstanding 6.750% Senior Secured Second Lien Notes (as defined below) due 2022 issued by VFH and Orchestra Co Issuer, Inc., a Delaware corporation and indirect subsidiary of the Company (together with VFH, the “Issuers”), and pay related fees and expenses. The terms, conditions and covenants applicable to the Incremental Term Loans are the same as the terms, conditions and covenants applicable to the existing term loans under the Credit Agreement, including a maturity date of March 1, 2026. The Company also previously entered into a five-year $525 million floating to fixed interest rate swap agreement that effectively fixes interest payment obligations on $525.0 million of principal under the First Lien Term Loan Facility at 4.8% through September 2024. During the year ended December 31, 2019, $100.0 million was repaid under the First Lien Term Loan Facility. As of December 31, 2019, $1,925 million was outstanding under the First Lien Term Loan Facility. On January 29, 2020 the Company entered into a five-year $1,000 million floating to fixed interest rate swap agreement that effectively fixes interest payment obligations on $1,000 million of principal under the First Lien Term Loan Facility at 4.9% through January 2025.

The term loan borrowings and revolver borrowings under the Credit Agreement bear interest at a per annum rate equal to, at the Company's election, either (i) the greatest of (a) the prime rate in effect, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate, in each case plus 0.5%, (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1% and (d) 1.00%, plus, in each case, 2.50%, with a stepdown to 2.25% based on VFH’s first lien leverage ratio, or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0%, plus, in each case, 3.50%, with a stepdown to 3.25% based on VFH’s first lien leverage ratio. In addition, a commitment fee accrues at a rate of 0.50% per annum on the average daily unused amount of the First Lien Revolving Facility, with stepdowns to 0.375% and 0.25% per annum based on VFH’s first lien leverage ratio, and is payable quarterly in arrears.

The First Lien Revolving Facility under the Credit Agreement is subject to a springing net first lien leverage ratio test which may spring into effect as of the last day of a fiscal quarter if usage of the aggregate revolving commitments exceeds a specified level as of such date. VFH is also subject to contingent principal prepayments based on excess cash flow and certain other triggering events. Borrowings under the Credit Agreement are guaranteed by Virtu Financial and VFH’s material non-regulated domestic restricted subsidiaries and secured by substantially all of the assets of VFH and the guarantors, in each case, subject to certain exceptions.

Under the Credit Agreement, term loans will mature on March 1, 2026. The term loans amortize in annual installments equal to 1.0% of the original aggregate principal amount of the term loans. The revolving commitments will terminate on March 1, 2022.

The Credit Agreement contains certain customary covenants and events of default, including relating to a change of control. If an event of default occurs and is continuing, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Credit Agreement.

To finance the Acquisition of KCG, on June 30, 2017, Virtu Financial and VFH previously entered into the Fourth Amended and Restated Credit Agreement which, upon the closing of the Acquisition of KCG, provided for an aggregate $1.15 billion of first lien secured term loans (the “Existing Term Loan Facility”). As described above, the Existing Term Loan Facility was fully terminated following its repayment in full with the proceeds of the First Lien Term Loan Facility.

Senior Secured Second Lien Notes

To finance the Acquisition of KCG, on June 16, 2017, Orchestra Borrower LLC (the “Escrow Issuer”), a wholly owned subsidiary of Virtu Financial, and Orchestra Co-Issuer, Inc. (the “Co-Issuer”) completed the offering of $500.0 million aggregate principal amount of 6.750% Senior Secured Second Lien Notes due 2022 (the “Notes”). The Notes were issued under an Indenture, dated June 16, 2017 (the “Indenture”), among the Escrow Issuer, the Co-Issuer and U.S. Bank National Association, as trustee and collateral agent.

On July 20, 2017, VFH assumed all of the obligations of the Escrow Issuer under the Indenture and the Notes. The gross proceeds from the Notes were deposited into a segregated escrow account with an escrow agent. The proceeds were released from escrow as of the KCG Closing Date and were used to finance, in part, the Acquisition of KCG, and to repay certain indebtedness of the Company and KCG.

As described above, the Credit Agreement was amended on October 9, 2019, on which date VFH borrowed an additional $525.0 million of incremental first lien term loans, the proceeds of which were used together with cash on hand to redeem the Notes in full. The Indenture was fully terminated following such redemption.

SBI Bonds

On July 25, 2016, VFH issued Japanese Yen Bonds (collectively the “SBI Bonds”) in the aggregate principal amount of ¥3.5 billion ($33.1 million at issuance date) to SBI Life Insurance Co., Ltd. and SBI Insurance Co., Ltd. The proceeds from the SBI Bonds were used to partially fund the investment in SBI (as described in Note 11 “Financial Assets and Liabilities”). The SBI Bonds are guaranteed by Virtu Financial. The SBI Bonds are subject to fluctuations on the Japanese Yen currency rates relative to the Company’s reporting currency (U.S. Dollar) with the changes reflected in Other, net in the Consolidated Statements of Comprehensive Income. In December 2019, the maturity date of the SBI Bonds was extended to January 2023. The principal balance was ¥3.5 billion ($32.2 million) as of December 31, 2019 and ¥3.5 billion ($31.9 million) as of December 31, 2018. The Company recorded gains of $0.3 million, $0.8 million and $1.1 million during the years ended December 31, 2019, 2018 and 2017, respectively.

As of December 31, 2019, aggregate future required minimum principal payments based on the terms of the long-term borrowings were as follows:



(in thousands)	December 31, 2019
2020	15,000
2021	15,000
2022	15,000
2023	47,225
2024	15,000
Thereafter	1,850,000
Total principal of long-term borrowings	$	1,957,225