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Indebtedness
6 Months Ended
Jun. 30, 2018
Indebtedness

Note 14. Indebtedness

The following is a summary of indebtedness and lease financing obligations (in thousands):

 

     As of June 30, 2018      As of December 31, 2017  

Current liabilities:

     

Term A loan

   $ 19,550      $ 19,550  

Term A-1 loan

     62,500        62,500  

Term B-3 loan

     5,450        5,450  

Lease finance obligation

     958        870  
  

 

 

    

 

 

 

Current obligations

     88,458        88,370  

Current deferred financing fees and debt discount

     (4,749      (4,811
  

 

 

    

 

 

 
     83,709        83,559  

Noncurrent liabilities:

     

Term A loan

     356,787        366,562  

Term A-1 loan

     1,140,625        1,171,875  

Term B-3 loan

     532,738        535,463  

Revolver

     —          —    

Lease finance obligation

     60,530        61,032  
  

 

 

    

 

 

 

Noncurrent obligations

     2,090,680        2,134,932  

Noncurrent deferred financing fees and debt discount

     (16,328      (18,688
  

 

 

    

 

 

 
     2,074,352        2,116,244  
  

 

 

    

 

 

 

Total

   $ 2,158,061      $ 2,199,803  
  

 

 

    

 

 

 

 

Senior Secured Credit Facilities

On December 20, 2017, the Company entered into a Fourth Amendment (the “Fourth Amendment”) to its Amended and Restated Credit Facility dated June 18, 2015, as previously amended on December 14, 2015, April 26, 2017, and October 17, 2017 (the “Credit Agreement”). The Fourth Amendment provided for a new Term B-3 Loan facility in the principal amount of $542.3 million, the proceeds of which (along with cash on hand) were used to repay in full the existing Term B Loan facility. Under the terms of the Fourth Amendment, the maturity date of the new Term B Loan facility remains April 26, 2024, but the new Term B Loan facility has an interest rate of LIBOR (as defined in the Credit Agreement) plus a percentage ranging from 2.00% to 2.25% for Eurocurrency Loans (as defined in the Credit Agreement) or the prime rate (as determined in accordance with the Credit Agreement) plus a percentage ranging from 1.00% to 1.25% for Base Rate Loans (as defined in the Credit Agreement), in either case depending on ARRIS’s consolidated net leverage ratio. The Fourth Amendment also increased to $500 million the amount of cash that can be used to offset indebtedness in the calculation of the consolidated net leverage ratio for purposes of determining the applicable interest rate. All other material terms of the Credit Agreement remained unchanged.

On October 17, 2017, the Company entered into the Third Amendment and Consent (the “Third Amendment”) to the Credit Agreement. Pursuant to the Third Amendment, ARRIS (i) incurred “Refinancing Term A Loans” of $391 million, (ii) incurred “Refinancing Term A-1 Loans” of $1,250 million, and (iii) obtained a “Refinancing Revolving Credit Facility” of $500 million, the proceeds of which were used to refinance in full the existing Term A Loans, the existing Term A-1 Loans and the existing Revolving Credit Loans outstanding under the Credit Agreement immediately prior to the effectiveness of the Third Amendment. The existing Term B Loans were not refinanced and remained outstanding.

The Third Amendment extended the maturity date of the Term A Loans and the Revolving Credit Facility to October 17, 2022. Pursuant to the Third Amendment, the Company is subject to a minimum consolidated interest coverage ratio test, which is unchanged from the Credit Agreement. In addition, the Company is subject to a maximum consolidated net leverage ratio test of not more than 4.0:1.0, subject to a step-down to 3.75:1.00 commencing with the fiscal quarter ending March 31, 2019. The amount of unrestricted cash used to offset indebtedness in the calculation of the consolidated net leverage ratio was also increased from $200 million to $500 million. The interest rates under the Third Amendment were not changed.

On April 26, 2017, ARRIS entered into a Second Amendment (the “Second Amendment”) to the Credit Agreement. The Second Amendment provided for a new Term B Loan facility in the principal amount of $545 million, the proceeds of which (along with cash on hand) were used to repay the existing Term B Loan facility. Under the terms of the Second Amendment, the new Term B-2 Loan has a maturity date of April 2024 and an interest rate of LIBOR plus a percentage ranging from 2.25% to 2.50% for Eurocurrency Rate Loans (as defined in the Credit Agreement), or the prime rate plus a percentage ranging from 1.25% to 1.50% for Base Rate Loans (as defined in the Credit Agreement), in either case depending on the Company’s consolidated net leverage ratio.

Interest rates on borrowings under the senior secured credit facilities are set forth in the table below.

 

     Rate     As of June 30, 2018  

Term A Loan

     LIBOR + 1.75      3.84

Term A-1 Loan

     LIBOR + 1.75      3.84

Term B-3 Loan

     LIBOR + 2.25      4.34

Revolving Credit Facility (1)

     LIBOR + 1.75      Not Applicable  

 

(1)

Includes unused commitment fee of 0.30% and letter of credit fee of 1.75% not reflected in interest rate above.

The Credit Agreement provides for adjustments to the interest rates paid on the Term A Loan, Term A-1 Loan, Term B-3 Loan and Revolving Credit Facility based upon the achievement of certain leverage ratios.

Borrowings under the senior secured credit facilities are secured by first priority liens on substantially all the assets of ARRIS and certain of its present and future subsidiaries who are or become parties to, or guarantors under, the Credit Agreement governing the senior secured credit facilities. The Credit Agreement provides terms for mandatory prepayments and optional prepayments and commitment reductions. The Credit Agreement also includes events of default, which are customary for facilities of this type (with customary grace periods, as applicable), including provisions under which, upon the occurrence of an event of default, all amounts outstanding under the credit facilities may be accelerated. The Credit Agreement contains usual and customary limitations on indebtedness, liens, restricted payments, acquisitions and asset sales in the form of affirmative, negative and financial covenants, which are customary for financings of this type, including the maintenance of a minimum interest coverage ratio and a maximum leverage ratio. As of June 30, 2018, ARRIS was in compliance with all covenants under the Credit Agreement.

 

During the three and six months ended June 30, 2018, the Company made mandatory payments of approximately $21.9 million and $43.8 million, respectively, related to the senior secured credit facilities.

Other

As of June 30, 2018, the scheduled maturities of the contractual debt obligations for the next five years are as follows (in thousands):

 

2018 (for the remaining six months)

   $ 43,750  

2019

     87,500  

2020

     87,500  

2021

     87,500  

2022

     1,297,738  

Thereafter

     513,662