DEBT

2016 Credit Agreement

The Company has a $1.8 billion credit arrangement that it entered into in mid-2016 (the “2016 Credit Agreement”) that provides for a five-year, $600.0 million term loan and a $1.2 billion revolving credit facility. The term loan will be repaid in 16 consecutive quarterly installments which commenced on September 30, 2016, plus a final payment due in June 2021, and may be prepaid at any time without penalty or premium (other than applicable breakage costs) at the option of the Company. The revolving credit facility may be used for loans, and up to $50.0 million may be used for letters of credit. The revolving loans may be borrowed, repaid and re-borrowed until June 2021, at which time all amounts borrowed must be repaid.

Amounts borrowed under the 2016 Credit Agreement bear interest at a rate equal to, at Gartner’s option, either:

(1) the greater of: (i) the administrative agent’s prime rate; (ii) the average rate on overnight federal funds plus 1/2 of 1%; (iii) the eurodollar rate (adjusted for statutory reserves) plus 1%; in each case plus a margin equal to between 0.125% and 0.50% depending on Gartner’s consolidated leverage ratio as of the end of the four consecutive fiscal quarters most recently ended; or

(2) the eurodollar rate (adjusted for statutory reserves) plus a margin equal to between 1.125% and 3.00%, depending on Gartner’s leverage ratio as of the end of the four consecutive fiscal quarters most recently ended.

The 2016 Credit Agreement contains certain customary restrictive loan covenants, including, among others, financial covenants requiring a maximum leverage ratio, a minimum interest expense coverage ratio, and covenants limiting Gartner’s ability to incur indebtedness, grant liens, make acquisitions, be acquired, dispose of assets, pay dividends, repurchase stock, make capital expenditures, make investments and enter into certain transactions with affiliates. The Company was in full compliance with the loan covenants as of December 31, 2016. The 2016 Credit Agreement was amended on January 20, 2017 to permit the acquisition of CEB (see Note 16—Subsequent Events) and the incurrence of an additional $1.375 billion senior secured term loan B facility, $300.0 million 364-day senior unsecured bridge facility and a senior unsecured high-yield bridge facility of up to $600.0 million (or the issuance of a corresponding amount of debt securities) to finance, in part, the acquisition and repay certain debt of CEB, and to modify certain covenants.

The following table summarizes the Company’s total outstanding borrowings (in thousands):



	Amount Outstanding December 31,			Amount Outstanding December 31,
Description:	2016			2015
Term loan (1)	$	585,000		$	380,000
Revolver (1), (2)	115,000			440,000
Other (3)	2,500			5,000
Subtotal (4), (5)	702,500			825,000
Less: deferred financing fees	(8,109		)	(6,169		)
Net carrying amount	$	694,391		$	818,831


(1)	The contractual annual interest rate as of December 31, 2016 on both the term loan and the revolver was 2.15%, which consisted of a floating Eurodollar base rate of 0.77% plus a margin of 1.38%. However, the Company has interest rate swap contracts which effectively convert the floating eurodollar base rate to a fixed base rate on $700.0 million of borrowings (see below).


(2)	The Company had $1.1 billion of available borrowing capacity on the revolver (not including the expansion feature) as of December 31, 2016.

(3)

Consists of a State of Connecticut economic development loan with a 3.0% fixed rate of interest that matures in 2022. During 2016, $2.5 million of the $5.0 million original balance was extinguished after the Company met certain employment targets. As a result of the loan extinguishment, the Company recorded a gain of $2.5 million, which was recorded in Other income (expense), net in the Consolidated Statements of Operations.


(4)	As of December 31, 2016, $30.0 million of the debt was classified as short-term and $672.5 million was classified as long- term on the Consolidated Balance Sheet.


(5)	The weighted-average annual interest rate on the Company's outstanding debt as of December 31, 2016 was 2.80%, which includes the impact of the Company's interest swap contracts, which are discussed below.

Interest Rate Hedges

As of December 31, 2016, the Company had three fixed-for-floating interest rate swap contracts. The swaps have a total notional value of $700.0 million and mature in late 2019. The Company designates the swaps as accounting hedges of the forecasted interest payments on $700.0 million of the Company’s variable rate borrowings. The Company pays base fixed rates on these swaps ranging from 1.53% to 1.60% and in return receives a floating eurodollar base rate on $700.0 million of 30-day notional borrowings.

The Company accounts for the interest rate swaps as cash flow hedges in accordance with FASB ASC Topic No. 815. Since the swaps hedge forecasted interest payments, changes in the fair value of the swaps are recorded in accumulated other comprehensive (loss) income, a component of equity, as long as the swaps continue to be highly effective hedges of the designated interest rate risk. Any ineffective portion of change in the fair value of the hedges is recorded in earnings. All of the swaps were highly effective hedges of the forecasted interest payments as of December 31, 2016. The interest rate swaps had a total negative fair value to the Company as of December 31, 2016 and 2015 of $2.3 million and $5.1 million, respectively, which is deferred and classified in accumulated other comprehensive (loss) income, net of tax effect.

Letters of Credit

The Company had $8.5 million of letters of credit and related guarantees outstanding at year-end 2016. The Company issues these instruments in the ordinary course of business to facilitate transactions with customers and others.