LONG-TERM DEBT AND CREDIT FACILITY

Financing Arrangements

In July 2013, the Company entered into a $650.0 million senior secured credit facility (the “Credit Facility”) with a syndicate of banks. Bank of America, N.A. served as the administrative agent. Merrill Lynch Pierce Fenner & Smith Incorporated, JPMorgan Securities LLC and U.S. Bank National Association acted as joint lead arrangers and joint book managers in the syndication of the Credit Facility. The Credit Facility consisted of a $300.0 million five-year revolving line of credit and an initial $350.0 million five-year term loan facility, each with a maturity date of July 1, 2018.

Generally, interest was charged on the principal amounts outstanding under the Credit Facility at the British Bankers Association LIBOR rate plus an applicable rate ranging from 1.25% to 2.25% depending on the Company’s consolidated leverage ratio. The Company also could opt for an interest rate equal to a base rate (as defined in the credit documents) plus an applicable rate, which also was based on the Company’s consolidated leverage ratio. The applicable one month LIBOR borrowing rate (LIBOR plus the Company’s applicable rate) as of September 30, 2015 was approximately 2.06%.

The Company’s indebtedness at September 30, 2015 consisted of $273.2 million outstanding from the $350.0 million term loan under the Credit Facility and $71.5 million on the line of credit under the Credit Facility. Additionally, the Company designated $11.6 million of debt held by its joint venture partners (representing funds loaned by its joint venture partners) as third-party debt in the consolidated financial statements and held $0.1 million of third-party notes and bank debt at September 30, 2015.

Beginning with the year ended December 31, 2014, the Credit Facility required an annual mandatory prepayment against the term loan obligation in an amount equal to 50% of the Excess Cash Flow, as defined by the Credit Facility, if the Company’s Consolidated Leverage Ratio was greater than 2.50 to 1.0, as of the end of that fiscal year. The Company’s Consolidated Leverage Ratio at December 31, 2014 was 2.90 to 1.0. On March 31, 2015, the Company made the required term loan prepayment in the amount of $26.5 million, utilizing $26.0 million from the line of credit to fund the term loan prepayment obligation.

As of September 30, 2015, the Company had $37.2 million in letters of credit issued and outstanding under the Credit Facility. Of such amount, $16.4 million was collateral for the benefit of certain of our insurance carriers and $20.8 million was for letters of credit or bank guarantees of performance or payment obligations of foreign subsidiaries.

The Company’s indebtedness at December 31, 2014 consisted of $319.4 million outstanding from the term loan under the Credit Facility and $45.5 million on the line of credit under the Credit Facility. Additionally, the Company designated $12.4 million of debt held by its joint ventures (representing funds loaned by its joint venture partners) as third-party debt in the consolidated financial statements and held $0.1 million of third-party notes and bank debt at December 31, 2014.

At September 30, 2015 and December 31, 2014, the estimated fair value of the Company’s long-term debt was approximately $357.0 million and $377.0 million, respectively. Fair value was estimated using market rates for debt of similar risk and maturity and a discounted cash flow model, which are based on Level 3 inputs as defined in Note 12.

In July 2013, the Company entered into an interest rate swap agreement for a notional amount of $175.0 million that was set to expire in July 2016. The notional amount of this swap mirrored the amortization of a $175.0 million portion of the Company’s $350.0 million term loan drawn from the Credit Facility. The swap required the Company to make a monthly fixed rate payment of 0.87% calculated on the amortizing $175.0 million notional amount and provided for the Company to receive a payment based upon a variable monthly LIBOR interest rate calculated on the same notional amount. The annualized borrowing rate of the swap at September 30, 2015 was 2.87%. The receipt of the monthly LIBOR-based payment offset a variable monthly LIBOR-based interest cost on a corresponding $175.0 million portion of the Company’s term loan from the Credit Facility. This interest rate swap was used to partially hedge the interest rate risk associated with the volatility of monthly LIBOR rate movement and was accounted for as a cash flow hedge.

The Credit Facility was subject to certain financial covenants including a consolidated financial leverage ratio and consolidated fixed charge coverage ratio. On October 6, 2014, the Company amended the Credit Facility’s defined terms for income and fixed charges to allow for the add-back of certain cash and non-cash charges related to the 2014 Restructuring when calculating the Company’s compliance with the consolidated financial leverage ratio and consolidated fixed charge coverage ratio. Subject to specifically defined terms and methods of calculation set forth in the Credit Facility’s credit agreement, as amended, the financial covenant requirements, as of each quarterly reporting period end, are defined as follows:

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Consolidated financial leverage ratio compares consolidated funded indebtedness to Credit Facility defined income. The maximum amount decreased, as scheduled, to not more than 3.25 to 1.00 effective with the quarter ended September 30, 2015. At September 30, 2015, the Company’s consolidated financial leverage ratio was 2.97 to 1.00, and using the Credit Facility defined income, the Company had the capacity to borrow up to approximately $34.4 million of additional debt.


•	Consolidated fixed charge coverage ratio compares Credit Facility defined income to Credit Facility defined fixed charges with a minimum permitted ratio of not less than 1.25 to 1.00. At September 30, 2015, the Company’s fixed charge ratio was 1.34 to 1.00.

At September 30, 2015, the Company was in compliance with all of its debt and financial covenants as required under the Credit Facility.

For information regarding the Company’s amended and restated credit facility, effective October 30, 2015, refer to Note 13 Subsequent Event of this report.