DEBT

Debt as of December 31 and March 31, 2017 consisted of the following (in thousands):



	December 31, 2017			March 31, 2017
6¼% Senior Notes due 2022	$	401,535		$	401,535
4½% Convertible Senior Notes due 2023	106,124			—
Term Loan	52,546			261,907
Term Loan Credit Facility	—			45,900
Revolving Credit Facility	—			139,100
Lombard Debt	206,831			196,832
Macquarie Debt	188,528			200,000
PK Air Debt	230,000			—
Airnorth Debt	14,507			16,471
Eastern Airways Debt	12,772			15,326
Other Debt	2,423			16,293
Unamortized debt issuance costs	(19,365		)	(11,345		)
Total debt	1,195,901			1,282,019
Less short-term borrowings and current maturities of long-term debt	(93,136		)	(131,063		)
Total long-term debt	$	1,102,765		$	1,150,956

4½% Convertible Senior Notes due 2023 — On December 18, 2017, we issued and sold $143.8 million of 4½% Convertible Senior Notes due 2023 (the “4½% Convertible Senior Notes”). The 4½% Convertible Senior Notes bear interest at a rate of 4.50% per year and interest is payable on June 1 and December 1 of each year, beginning on June 1, 2018. The 4½% Convertible Senior Notes mature on June 1, 2023 and may not be redeemed by us prior to maturity.

The 4½% Convertible Senior Notes were issued pursuant to an indenture dated as of June 17, 2008 (the “Base Indenture”), among the Company, the subsidiary guarantors named therein (the “Guarantors”) and U.S. Bank National Association, as trustee (the “Trustee”), as supplemented by the sixth supplemental indenture thereto dated as of December 18, 2017 (the “Supplemental Indenture” and, together with the Base Indenture, the “Indenture”) among us, the Guarantors and the Trustee.

The 4½% Convertible Senior Notes are convertible into cash, shares of our common stock or a combination of cash and shares of the our common stock, at our election. We have initially elected combination settlement. The initial conversion price of the 4½% Convertible Senior Notes is approximately $15.64 (subject to adjustment in certain circumstances), based on the initial conversion rate of 63.9488 Common Shares per $1,000 principal amount of 4½% Convertible Senior Notes. Prior to December 1, 2022, the 4½% Convertible Senior Notes will be convertible only upon the occurrence of certain events and during certain periods, and thereafter, until the close of business on the second scheduled trading day immediately preceding the maturity date. The 4½% Convertible Senior Notes are our senior unsecured obligations. As of December 31, 2017, the if-converted value of the 4½% Convertible Senior Notes did not exceed the principal balance.

The proceeds were used to repay $89.6 million of the $350 million term loan (the “Term Loan”) as discussed below and to pay the $10.1 million cost of the convertible note hedge transaction described below, with the remainder available for general corporate purposes.

Accounting standards require that convertible debt which may be settled in cash upon conversion (including partial cash settlement) be accounted for with a liability component based on the fair value of similar nonconvertible debt and an equity component based on the excess of the initial proceeds from the convertible debt over the liability component. Such excess represents proceeds related to the conversion option and is recorded as additional paid-in capital. The liability is recorded at a discount, which is then amortized as additional non-cash interest expense over the term of the 4½% Convertible Senior Notes. The balances of the debt and equity components of the 4½% Convertible Senior Notes as of December 31, 2017 is as follows (in thousands):



Equity component - net carrying value ⁽¹⁾	$	36,778
Debt component:
Face amount due at maturity	$	143,750
Unamortized discount	(37,626		)
Debt component - net carrying value	$	106,124

_____________

⁽¹⁾ Net of equity issuance costs of $1.0 million.

The remaining debt discount is being amortized to interest expense over the term of the 4½% Convertible Senior Notes using the effective interest rate. The effective interest rate for the three and nine months ended December 31, 2017 was 11.0%. Interest expense related to our 4½% Convertible Senior Notes for the three and nine months ended December 31, 2017 was as follows (in thousands):



Contractual coupon interest	$	234
Amortization of debt discount	181
Total interest expense	$	415

Convertible Note Call Spread Overlay — Concurrent with the issuance of the 4½% Convertible Senior Notes, we entered into privately negotiated convertible note hedge transactions (the “Note Hedge Transactions”) and warrant transactions (the “Warrant Transactions”) with each of Credit Suisse Capital LLC, Barclays Bank PLC, Citibank, N.A. and JP Morgan Chase Bank, National Association (the “Option Counterparties”). These transactions represent a Call Spread Overlay, whereby the cost of the Note Hedge Transactions we purchased to cover the cash outlay upon conversion of the 4½% Convertible Senior Notes was reduced by the sales price of the Warrant Transactions. Each of these transactions is described below.

The Note Hedge Transactions cost an aggregate $40.4 million and are expected generally to reduce the potential dilution and/or offset the cash payments we are required to make in excess of the principal amount upon conversion of the 4½% Convertible Senior Notes in the event that the market price of our common stock is greater than the strike price of the Note Hedge Transactions, which is initially $15.64 (subject to adjustment), corresponding approximately to the initial conversion price of the 4½% Convertible Senior Notes. The Note Hedge Transactions have been accounted for by recording the cost as a reduction to additional paid-in capital.

We received proceeds of $30.3 million for the Warrant Transactions, in which we sold net-share-settled warrants to the Option Counterparties in an amount equal to the number of shares of the our common stock initially underlying the 4½% Convertible Senior Notes, subject to customary anti-dilution adjustments. The strike price of the warrants is $20.02 per share (subject to adjustment), which is 60% above the last reported sale price of our common stock on the New York Stock Exchange on December 13, 2017. The Warrant Transactions could have a dilutive effect to our stockholders to the extent the market price per share of our common stock, as measured under the terms of the Warrant Transactions, exceeds the applicable strike price of the warrants. The Warrant Transactions have been accounted for by recording the proceeds received as additional paid-in capital.

The Note Hedge Transactions and the Warrant Transactions are separate transactions, in each case entered into by us with the Option Counterparties, and are not part of the terms of the 4½% Convertible Senior Notes and will not affect any holder’s rights under the 4½% Convertible Senior Notes.

Term Loan and Revolving Credit Facility — During the nine months ended December 31, 2017, we had borrowings of $174.8 million and made payments of $313.9 million under our $400 million revolving credit facility (the “Revolving Credit Facility”). Additionally, we paid $209.5 million to reduce our borrowings under the Term Loan. As of December 31, 2017, we had $12.4 million in letters of credit outstanding under the Revolving Credit Facility.

Term Loan Credit Facility — During the nine months ended December 31, 2017, we paid $45.9 million under our $200 million of term loan commitments (the “Term Loan Credit Facility”) and terminated the facility in October 2017.

PK Air Debt — On July 17, 2017, a wholly-owned subsidiary entered into a term loan credit agreement with PK AirFinance S.à r.l., as agent, and PK Transportation Finance Ireland Limited, as lender, and other lenders from time to time party thereto, which provided for commitments in an aggregate amount of up to $230 million to make up to 24 term loans, each of which shall be made in respect of an aircraft to be pledged as collateral for all of the term loans. The term loans are also secured by a pledge of all shares of the borrower and any other assets of the borrower, and will be guaranteed by the Company. The financing funded in two tranches in September 2017 and proceeds were used to repay $17.0 million of the Term Loan Credit Facility, $93.7 million of the Term Loan and $103.0 million of the Revolving Credit Facility.

Each term loan bears interest at an interest rate equal to, at the borrower’s option, a floating rate of one-month LIBOR plus a margin of 5% per annum (the “Margin”), subject to certain costs of funds adjustments, determined two business days before the borrowing date of each term loan, or a fixed rate based on a notional interest rate swap of twelve 30-day months in respect of such term loan with a floating rate of interest based on one-month LIBOR, plus the Margin.

The borrower is required to repay each term loan on an annuity basis, payable monthly in arrears starting on the seventh month following the date of the borrowing of such term loan, with a final payment of 53% of the initial amount of such term loan due on the 70th month following the date of the borrowing of such term loan.

In connection with the credit agreement, the borrower will guarantee certain of its direct parent’s obligations under existing aircraft operating leases up to a capped amount.

Other Debt — Other Debt as of March 31, 2017 primarily included amounts payable relating to the third year earn-out payment of $16.0 million for our investment in Cougar Helicopters Inc. (“Cougar”), which was paid in April 2017.