5. REVOLVING CREDIT FACILITY, NOTES PAYABLE AND CAPITAL LEASES

6 Months Ended

Jun. 30, 2017

Debt Disclosure [Abstract]

REVOLVING CREDIT FACILITY, NOTES PAYABLE AND CAPITAL LEASES

Revolving credit facility, notes payable, and capital lease obligations:

As of the six months ended June 30, 2017 our debt obligations consist of the following (in thousands):

	June 30,			December 31,
	2017			2016
First Lien Term Loans		466,813			478,938
Second Lien Term Loans		168,000			168,000
Discounts on term loans		(15,915	)		(16,783	)
Promissory note payable to the former owner of a practice acquired at an interest rate of 1.5% due through 2019		787			980
Equipment notes payable at interest rates ranging from 3.3% to 5.6%, due through 2020, collateralized by medical equipment		269			341
Obligations under capital leases at interest rates ranging from 2.5% to 10.8%, due through 2022, collateralized by medical and office equipment		9,015			7,256
Total debt obligations		628,969			638,732
Less: current portion		(27,317	)		(26,557	)
Long term portion debt obligations	$	601,652		$	612,175

Term Loans, Revolving Credit Facility and Financing Activity Information:

At June 30, 2017, our credit facilities were comprised of two tranches of term loans (“First Lien Term Loans” and “Second Lien Term Loans”) and a revolving credit facility of $117.5 million (the “Revolving Credit Facility”). As of June 30, 2017, we were in compliance with all covenants under our credit facilities.

Included in our consolidated balance sheets at June 30, 2017 are $618.9 million of senior secured term loan debt (net of unamortized discounts of $15.9 million), broken down by loan agreement as follows (in thousands):

	Face Value		Discount			Total Carrying Value
First Lien Term Loans	$	466,813	$	(14,089	)	$	452,724
Second Lien Term Loans	$	168,000	$	(1,826	)	$	166,174
Total	$	634,813	$	(15,915	)	$	618,898

Our revolving credit facility had no aggregate principal amount outstanding as of June 30, 2017.

The following describes our 2017 financing activities:

Fourth Amendment to First Lien Credit Agreement

On February 2, 2017, we entered into Amendment No. 4 (the “Fourth Amendment”) to our Amended and Restated First Lien Credit and Guaranty Agreement dated July 1, 2016 (as amended from time to time, the “First Lien Credit Agreement”). Pursuant to the Fourth Amendment, the interest rate charged for the applicable margin on the first lien term loans and the revolving credit facility was reduced by 50 basis points, from 3.75% to 3.25%. The minimum LIBOR rate underlying the first lien term loans remains at 1.0%. Except for such reduction in the interest rate on credit extensions, the Fourth Amendment did not result in any other material modifications to First Lien Credit Agreement. RadNet incurred expenses for the transaction in the amount of $543,000, which was recorded to discount on debt and will be amortized over the remaining term of the agreement.

The following describes our prior applicable financing activities:

Restatement Amendment and the First Lien Credit Agreement

On July 1, 2016, (the “Restatement Effective Date”), we entered into Amendment No. 3 to Credit and Guaranty Agreement (the “Restatement Amendment”) pursuant to which we amended and restated our then existing First Lien Credit Agreement. Pursuant to the First Lien Credit Agreement, we have issued $485 million of senior secured term loans (the “First Lien Term Loans”) and established a $117.5 million senior secured revolving credit facility (the “Revolving Credit Facility”). Prior to the Restatement Effective Date, our first lien credit facilities consisted of a Credit and Guaranty Agreement that we entered into on October 10, 2012 (the “Original First Lien Credit Agreement”), as subsequently amended by a first amendment dated April 3, 2013 (the “2013 Amendment”), a second amendment dated March 25, 2014 (the “2014 Amendment”), and a joinder agreement dated April 30, 2015 (the “2015 Joinder” and collectively with the Original First Lien Credit Agreement, the 2013 Amendment and the 2014 Amendment, the “Prior First Lien Credit Agreement”). The First Lien Credit Agreement increased the aggregate principal amount of First Lien Term Loans to $485.0 million and increased the Revolving Credit Facility to $117.5 million. Proceeds from the First Lien Credit Agreement were used to repay the previously outstanding first lien loans under the Prior First Lien Credit Agreement, make a $12.0 million principal payment of the Second Lien Term Loans (as described below), pay costs and expenses related to the First Lien Credit Agreement and provide approximately $10.0 million for general corporate purposes.

Interest. The interest rates payable on the First Lien Term Loans (after giving effect to the Fourth Amendment described above) are (a) the Adjusted Eurodollar Rate (as defined in the First Lien Credit Agreement) plus 3.25% per annum or (b) the Base Rate (as defined in the First Lien Credit Agreement) plus 2.25% per annum. As applied to the First Lien Term Loans, the Adjusted Eurodollar Rate has a minimum floor of 1.0%. The three month Adjusted Eurodollar Rate at June 30, 2017 was 1.30%.

Payments. The scheduled quarterly principal payments of the First Lien Term Loans are approximately $6.1 million, with the balance due at maturity. Prior to the Restatement Amendment, the quarterly principal payments on the first lien term loans under the Prior First Lien Credit Agreement were approximately $6.2 million.

Maturity Date. The maturity date for the First Lien Term Loans shall be on the earliest to occur of (i) July 1, 2023, (ii) the date on which all First Lien Term Loans shall become due and payable in full under the First Lien Credit Agreement, whether by acceleration or otherwise, and (iii) September 25, 2020 if our indebtedness under the Second Lien Credit Agreement has not been repaid, refinanced or extended prior to such date.

Incremental Feature: Under the First Lien Credit Agreement, we can elect to request 1) an increase to the existing Revolving Credit Facility and/or 2) additional First Lien Term Loans, provided that the aggregate amount of such increases or additions does not exceed (A) an amount not in excess of $100.0 million minus any incremental loans requested under the similar provisions of the Second Lien Credit Agreement or (B) if the First Lien Leverage Ratio would not exceed 3.50:1.00 after giving effect to such incremental facilities, an uncapped amount, in each case subject to the conditions and limitations set forth in the First Lien Credit Agreement. Each lender approached to provide all or a portion of any incremental facility may elect or decline, in its sole discretion, to provide any incremental commitment or loan.

Revolving Credit Facility: The First Lien Credit Agreement provides for a $117.5 million Revolving Credit Facility. The termination date of the Revolving Credit Facility is the earliest to occur of: (i) July 1, 2021, (ii) the date the Revolving Credit Facility is permanently reduced to zero pursuant to section 2.13(b) of the First Lien Credit Agreement, which addresses voluntary commitment reductions, (iii) the date of the termination of the Revolving Credit Facility due to specific events of default pursuant to section 8.01 of the First Lien Credit Agreement, and (iv) September 25, 2020 if our indebtedness under the Second Lien Credit Agreement (described below) has not been repaid, refinanced or extended prior to such date. Amounts borrowed under the Revolving Credit Facility bear interest based on types of borrowings as follows (after giving effect to the Fourth Amendment described above): (i) unpaid principal on loans under the Revolving Credit Facility at the Adjusted Eurodollar Rate (as defined in the First Lien Credit Agreement) plus 3.25% per annum or the Base Rate (as defined in the First Lien Credit Agreement) plus 2.25% per annum, (ii) letter of credit fees at 3.25% per annum and fronting fees for letters of credit at 0.25% per annum, in each case on the average aggregate daily maximum amount available to be drawn under all letters of credit issued under the First Lien Credit Agreement, and (iii) commitment fee of 0.5% per annum on the unused revolver balance.

Second Lien Credit Agreement:

On March 25, 2014, we entered into a Second Lien Credit and Guaranty Agreement (as amended from time to time, the “Second Lien Credit Agreement”) pursuant to which we issued $180 million of secured term loans (the “Second Lien Term Loans”). The proceeds from the Second Lien Term Loans were used to redeem our 10 3/8% senior unsecured notes, due 2018, to pay the expenses related to the transaction and for general corporate purposes. On July 1, 2016, in conjunction with the restated First Lien Credit Agreement, a $12.0 million principal payment was made on the Second Lien Term Loans.

The Second Lien Credit Agreement provides for the following:

Interest. The interest rates payable on the Second Lien Term Loans are (a) the Adjusted Eurodollar Rate (as defined in the Second Lien Credit Agreement) plus 7.0% or (b) the Base Rate (as defined in the Second Lien Credit Agreement) plus 6.0%. The Adjusted Eurodollar Rate has a minimum floor of 1.0% on the Second Lien Term Loans. The three month Adjusted Eurodollar Rate at June 30, 2017 was 1.30%. The rate paid on the Second Lien Term Loan at June 30, 2017 was 8.15%.

Payments. There is no scheduled amortization of the principal of the Second Lien Term Loans. Unless otherwise prepaid as a result of the occurrence of certain mandatory prepayment events, all principal will be due and payable on the termination date described below.

Termination. The maturity date for the Second Lien Term Loans is the earlier to occur of (i) March 25, 2021, and (ii) the date on which the Second Lien Term Loans shall otherwise become due and payable in full under the Second Lien Credit Agreement, whether by voluntary prepayment per section 2.13(a) of the Second Lien Credit Agreement or events of default per section 8.01 of the Second Lien Credit Agreement.