Debt

The Company is obligated under notes and other indebtedness as follows (in millions):



	December 31,
	2013		2012
Accounts receivable securitization program	$	150.0	$	135.0
Secured promissory notes	7.8		14.5
Real estate credit agreement	—		101.7
Term loan credit facility	125.0		125.0
Convertible senior debentures	—		90.1
Revolving credit facilities	10.4		31.1
Senior notes	370.0		370.0
Related party credit agreements	5.8		114.9
Other indebtedness	14.0		29.3
	683.0		1,011.6
Less current portion of debt	283.6		519.4
Long-term debt	$	399.4	$	492.2

Accounts receivable securitization program

DST securitizes certain of its domestic accounts receivable through an accounts receivable securitization program with a third-party bank. The maximum amount that can be outstanding under this program is $150.0 million. In May 2013, the Company renewed its accounts receivable securitization program. The facility will expire by its terms on May 15, 2014, unless renewed.

Under the terms of the accounts receivable securitization program, (a) DST periodically acquires accounts receivable originated by certain of its domestic subsidiaries, including, but not limited to, DST Output, DST Health Solutions, DST Technologies and Argus Health Systems (the “Subsidiary Originators”), (b) DST transfers receivables originated by DST and receivables acquired from the Subsidiary Originators, on a periodic basis, to a wholly-owned bankruptcy remote special purpose subsidiary of DST (the “SPE”), and (c) the SPE then sells undivided interests in the receivables to the bank. DST retains servicing responsibility over the receivables. The program contains customary restrictive covenants as well as customary events of default.

DST has continuing involvement with the transferred assets because it maintains servicing responsibilities for the accounts receivable assets included in the accounts receivable securitization program. Accounts receivable assets transferred from DST and certain of its domestic subsidiaries to its wholly-owned, bankruptcy remote special purpose subsidiary contain restrictions because they are not available to satisfy the creditors of any other person, including DST or any of its subsidiaries or affiliates. Further, neither DST nor the SPE guarantees collectability of the receivables or the creditworthiness of obligors. The SPE retains an interest in the receivables in excess of the amount transferred to the conduit, and such receivables will continue to be recognized on the Consolidated Balance Sheet. The carrying value of the retained interest approximates its estimated fair value at the balance sheet date. The Company believes increases in the level of assumed interest rates and/or credit losses compared to assumptions in effect at the balance sheet date by 10% or 20% would not materially affect the fair value of the retained interest at the reporting date.

The outstanding amount under the program was $150.0 million and $135.0 million at December 31, 2013 and 2012, respectively. During the years ended December 31, 2013, 2012, and 2011 total proceeds from the accounts receivable securitization program were approximately $1,005.2 million, $917.4 million and $924.1 million and total repayments were approximately $990.2 million, $917.4 million and $914.1 million, respectively, which comprise the net cash flow in the financing section of the Consolidated Statement of Cash Flows.

Aggregate transfers of undivided interests in the receivables from the SPE to the bank were $1,727.0 million and $1,665.7 million for the years ended December 31, 2013 and 2012, respectively. The impact on net income stemming from these transfers was not material. Costs associated with the accounts receivable securitization program are included in interest expense on the Consolidated Statement of Income. The program costs applicable to the outstanding amount of undivided interests in the receivables are generally based on the LIBOR rate plus an applicable margin.

Secured promissory notes

The secured promissory notes represent loans for real estate and equipment purchases. Included in the secured promissory notes payable as of December 31, 2013 is a real estate mortgage entered into by Output U.K. in July 2011, which is secured by real estate in Bristol U.K. The loan, denominated in British Pounds, requires quarterly principal payments and matures in July 2018. At December 31, 2013 and 2012, the outstanding balances under this note payable were $7.3 million and $7.9 million, respectively. The remaining real estate borrowings are due in installments with the balance due at the end of the term. Interest rates on the real estate borrowings are fixed at 6.0%. The loans are secured by real property owned by the Company.

Real estate credit agreement and interest rate swap

Certain subsidiaries of DST entered into a real estate credit agreement with a syndicate of lenders. The credit agreement provides for a five-year, non-revolving credit facility in an aggregate principal amount of up to $120.0 million. The credit facility was secured by, among other things, the real estate and properties owned by these DST subsidiaries as well as an assignment of the related leases, rents and other benefits of these assets. The interest rate applicable to the credit agreement was a floating rate tied to either offshore LIBOR rate plus an applicable margin rate of 1.75% or the prime rate (as defined in the credit agreement), as elected by DST. The Company repaid the outstanding balance of the real estate credit facility upon maturity in September 2013. The loan, which had an outstanding balance of $101.7 million at December 31, 2012, was not renewed.

In January 2009, the Company entered an interest rate swap with a bank to fix the interest rate on its syndicated real estate credit agreement at approximately 4.49% (includes 1.75% applicable margin rate). In connection with the maturity of the loan in September 2013, the related interest rate swap was also settled.

Term loan credit facility

On October 28, 2011, the Company entered into a $125.0 million unsecured term loan credit facility with a bank. The interest rates applicable to loans under the credit facility are generally based on LIBOR or prime rates plus applicable margins as defined in the facility. During 2013, the Company amended the facility resulting in the removal of the provision requiring prepayment of the loan upon the incurrence of additional indebtedness and extended the maturity date to October 28, 2014. The facility contains customary restrictive covenants, as well as customary events of default. Based on the terms of the credit facility, the Company may be required to prepay the loan if certain events occur. Amounts prepaid may not be reborrowed.

Convertible senior debentures

At December 31, 2012, the Company had $90.1 million of 4.125% Series C convertible senior debentures (“Convertible debentures”) outstanding that were due in 2023. The Company paid cash of $122.8 million during the year ended December 31, 2013 to redeem all remaining Convertible debentures, which resulted in there being no Convertible debentures outstanding at December 31, 2013. The difference between the fair value of the liability component of the Convertible debentures and the cash paid upon conversion was reflected as a $30.9 million reduction to Additional paid-in capital during the year ended December 31, 2013.

Beginning August 15, 2010, the Company did not pay regular cash interest on the Convertible debentures prior to maturity. Instead, the original principal amount of the Convertible debentures increased daily at a rate of 4.125% per year to approximately $1,700, which is the full accreted principal amount payable at maturity for each $1,000 original principal amount of the debentures. The Company was required to pay contingent interest during any six-month interest period commencing with the period from August 20, 2010 to February 14, 2011, and thereafter from February 15 to August 14 or August 15 to February 14, for which the average trading price of the Convertible debentures for the applicable five trading-day reference period equaled or exceeded 120% of the accreted principal amount of the Convertible debentures.

Revolving credit facilities

On April 16, 2010, the Company entered into a new syndicated line of credit facility. The new credit agreement, as amended, provides for a revolving unsecured credit facility in an aggregate principal amount of up to $630.0 million. The interest rates applicable to loans under the new credit agreement are generally based on LIBOR, Federal Funds or prime rates plus applicable margins as defined in the agreement. The revolving credit facility contains grid schedules that adjust borrowing costs up or down based upon the Company's consolidated leverage ratio. The grid schedules may result in fluctuations in borrowing costs ranging from 1.10% to 2.10% over LIBOR and 0.10% to 1.10% over base rate as defined. Additionally, an annual facility fee of 0.15% to 0.40% is required on this revolving syndicated line of credit. The credit agreement contains customary restrictive covenants, as well as certain customary events of default. Among other provisions, the credit agreement limits consolidated indebtedness, liens, investments, subsidiary indebtedness, asset dispositions and restricted payments (including stock repurchases and cash dividends), and requires certain leverage and interest coverage ratios to be maintained. If any event of default occurs and is continuing, all amounts payable under the credit agreement may be declared immediately due and payable. The maturity date for the new credit facility is July 1, 2015. Amounts borrowed on this syndicated revolving credit facility were $10.4 million and $1.1 million at December 31, 2013 and 2012, respectively.

One of the Company's subsidiaries has an unsecured line of credit agreement that provides for unsecured revolving borrowings up to $50.0 million that matures on September 30, 2014. Borrowings under the facility were available at rates based on LIBOR rates plus the applicable margin of 1.4%. Commitment fees of 0.20% per annum based on the unused portions are payable quarterly. There are no amounts borrowed on this line of credit at December 31, 2013 and $30.0 million borrowed at December 31, 2012.

One of the Company's subsidiaries maintains a margin credit facility with a regulated broker/dealer. There were no borrowings under this facility at December 31, 2013 and 2012. This facility is collateralized by the underlying marketable securities. The Company has an unsecured revolving line of credit for $10.0 million that is payable immediately upon demand by the lender. Borrowings on the line of credit are available at variable rates of interest based on the bank's Prime rate. Interest is payable monthly. No amounts were drawn on this facility during 2013 and 2012. One of the Company's foreign subsidiaries has an overdraft credit facility that provides for borrowings of up to $8.2 million, denominated in British Pounds, at variable rates of interest based on the bank's base rate plus 1.5% per annum. There are no amounts outstanding at December 31, 2013 and 2012.

Senior notes

On August 9, 2010, the Company issued $370.0 million of aggregate principal of privately placed senior notes (collectively, the “Senior Notes”). The Senior Notes are comprised of $40.0 million of 4.19% Series A Senior Notes due August 9, 2015, $105.0 million of 4.86% Series B Senior Notes due August 9, 2017, $65.0 million of 5.06% Series C Senior Notes due August 9, 2018 and $160.0 million of 5.42% Series D Senior Notes due August 9, 2020.

The Senior Notes are unsecured senior obligations of the Company and were issued pursuant to a note purchase agreement dated August 9, 2010 (the “Agreement”). Interest on the Senior Notes is payable semi-annually on February 9 and August 9 of each year, commencing February 9, 2011. The Company may prepay the Senior Notes at any time, in an amount not less than 10% of the aggregate principal amount of the Senior Notes then outstanding, at a price equal to 100% of the principal amount being prepaid, plus accrued and unpaid interest and a “make-whole” prepayment premium. The Company may be required to prepay all or a portion of the Senior Notes upon the occurrence of any “Change in Control,” as defined in the Agreement.

Pursuant to the Agreement, any subsidiary of the Company that is required to become a party to or otherwise guarantee the syndicated line of credit facility or other indebtedness in excess of $100.0 million, will be required to guarantee the Company's obligations under the Senior Notes. The Agreement contains customary restrictive covenants, as well as certain customary events of default, including cross-default provisions. Among other provisions, the Agreement limits the ability of the Company to incur or create liens, sell assets, issue priority indebtedness and change lines of business. The agreement also requires certain leverage and interest coverage ratios to be maintained.

Related party credit agreements

The Company had a related party promissory note with BFDS that provided for unsecured revolving borrowings by the Company of up to $140.0 million. In May 2013, the Company repaid its promissory note with BFDS, which had an outstanding balance of $107.0 million at December 31, 2012. The promissory note matured on July 1, 2013 and was not renewed. The interest rate applicable to the loan was based on LIBOR plus an applicable margin correlating to the applicable margin under the Company's $630.0 million syndicated line of credit facility. For the years ended December 31, 2013, 2012 and 2011, the Company recorded interest expense related to this loan of $0.7 million, $2.5 million and $2.7 million, respectively.

In 2011, DST's Output U.K. subsidiary entered into a loan agreement denominated in British Pounds with IFDS U.K. The agreement provided for unsecured revolving borrowings by Output U.K. and was scheduled to mature on December 31, 2015. The interest rate applicable to the loan was based on the base rate of the Bank of England plus an applicable margin of 3.0%. In March 2013, the loan was terminated. There were no amounts outstanding under this loan at the date the loan was terminated or December 31, 2012.

As mentioned above, DST acquired certain intangible assets in 2011 from BFDS in exchange for an installment loan that is payable over five years and matures in September 2016. The amounts outstanding at December 31, 2013 and 2012 were $5.8 million and $7.9 million, respectively.

Other indebtedness

The Company has $10.4 million and $13.5 million outstanding at December 31, 2013 and 2012, respectively, related to debt assumed in a 2006 business acquisition. This obligation is payable in monthly installments and the interest rate is fixed at 5.6%. The maturity date of this indebtedness is October 2016.

Other indebtedness included a borrowing arrangement denominated in British Pounds between Output U.K. and a bank that was secured by accounts receivable of Output U.K. This arrangement was repaid in 2012. During the years ended December 31, 2012 and 2011, proceeds received from this loan were $143.0 million and $234.5 million, and total repayments were $164.3 million and $238.9 million, respectively, which have been included in net payments on revolving credit facilities in the Consolidated Statement of Cash Flows.

The Company had a $50.0 million unsecured credit facility with a vendor for purchases of the vendor's eligible equipment, software or services. The draw period under this new equipment credit facility expired on December 31, 2012. The maturity date for each loan under this credit facility is the earlier of i) the last day of the thirty first (31st) calendar month following the loan date or ii) June 30, 2015. Interest rates applicable to the loans under this credit facility are generally based on the LIBOR rate plus an applicable margin. The applicable margin is based on a grid schedule that adjusts borrowing costs up or down based upon the Company's consolidated leverage ratio. In March 2013, the facility was repaid and then terminated. At December 31, 2012, the equipment credit facility had $11.6 million outstanding.

Future principal payments of indebtedness at December 31, 2013 are as follows (in millions):



2014	$	283.6
2015	57.7
2016	6.4
2017	106.2
2018	69.1
Thereafter	160.0
Total	$	683.0

Based upon the borrowing rates currently available to the Company and its subsidiaries for indebtedness with similar terms and average maturities, the carrying value of long-term debt, with the exception of the Senior Notes, is considered to approximate fair value at December 31, 2013 and 2012. The estimated fair value of the Senior Notes was derived principally from quoted prices (level 2 in the fair value hierarchy).

As of December 31, 2013, the carrying and fair value of the Senior Notes were as follows (in millions):



	Carrying Value		Estimated Fair Value
Senior notes—Series A	$	40.0	$	40.6
Senior notes—Series B	105.0		110.0
Senior notes—Series C	65.0		68.3
Senior notes—Series D	160.0		168.1
Total	$	370.0	$	387.0