|9 Months Ended|
Sep. 30, 2011
We have a loan agreement with a group of banks that was entered into in June 2011 to make the WBI acquisition and provide working capital for our continuing operations. The loan agreement consists of a term loan facility and a revolving loan facility, which also provides us with letters of credit. The loan agreement, which expires in June 2016, replaced a predecessor loan agreement that also consisted of a term loan, revolving loan, and letters of credit.
The term loan requires payments in quarterly installments based on an accelerating amortization schedule, with 15% of the original $125 million principal amount due in each of 2012 and 2013, 20% due in each of 2014 and 2015, and 30% due in 2016. The amount of term loan borrowings outstanding as of September 30, 2011 is approximately $115.6 million. The amount of term loan borrowings outstanding on the predecessor loan agreement as of December 31, 2010 was approximately $17.8 million.
Our scheduled term loan payments following September 30, 2011 are: $4.7 million in 2011, $18.8 million in 2012, $23.4 million in 2013, $25 million in 2014, $34.3 million in 2015, and $9.4 million in 2016.
The maximum amount of credit available to us for revolving loans and letters of credit as of September 30, 2011 was $125 million and the loan agreement has a provision whereby we may elect to increase this maximum to a total of $175 million. We may borrow revolving loan amounts at any time and can repay the borrowings at any time without premium or penalty. We pay fees on letters of credit that are issued. We had approximately $48.8 million in revolving loan borrowings outstanding and $5 million of letters of credit outstanding as of September 30, 2011. We had approximately $6.9 million of letters of credit outstanding and no revolving loan borrowings outstanding as of December 31, 2010 on the predecessor loan agreement.
Total borrowed funds outstanding as of September 30, 2011, including both term loan borrowings and revolving loan borrowings, were approximately $164.4 million. Total bank loan borrowed funds outstanding as of December 31, 2010 were $17.8 million.
We incurred financing costs of approximately $1.7 million in connection with the borrowing facility we entered into in June 2011. These costs were capitalized and will be amortized over the life of the loan, which is five years.
We pay interest on the term loan borrowings and revolving loan borrowings at LIBOR plus a base margin or at a base rate (typically the prime rate) plus a base margin. The LIBOR base margin as of September 30, 2011 is 2.25% and the base rate base margin as of September 30, 2011 is 0.5%. The base margins decline in increments as our Total Funded Debt/EBITDA Ratio declines. As of September 30, 2011, interest rates on portions of our outstanding debt ranged from 2.48% to 3.75%. The effective interest rate on our aggregate outstanding debt as of September 30, 2011 was 2.87%.
We have employed interest rate hedges on a significant portion of our outstanding borrowings. In July 2011, we entered into a three-year amortizing LIBOR interest rate swap on the term loan for an initial amount of $101 million. The swap amount amortizes as the term loan amortizes, with reductions in the swap amount occurring on the same dates and for approximately the same amounts as term loan repayments. With the swap in place, we will pay an effective rate on the hedged term loan of 0.56% plus our base margin from July 2011 through June 2012, and an effective rate of 1.615% plus our base margin from July 2012 through June 2014. In July 2011, we purchased a two-year LIBOR interest rate swap on the revolving loan debt for an initial amount of $40 million. The swap amount declines to $20 million in June 2012, and expires in June 2013. With the swap in place, we will pay an effective rate on the hedged term debt of 0.7775% plus our base margin during the two years.
Interest expense incurred on bank loan borrowings for the three months ended September 30, 2011 was approximately $1.3 million and approximately $68 thousand for the same period of the prior year. Interest expense incurred on bank loan borrowings for the nine months ended September 30, 2011 was approximately $1.9 million and approximately $135 thousand for the same period of the prior year.
The loan agreement contains collateral requirements that secure our assets, restrictive covenants, other affirmative and negative covenants, and subjects us to certain conditions and limitations. Restrictive covenants include a maximum Total Funded Debt/EBITDA Ratio, which decreases over time, and a minimum Fixed Charge Coverage Ratio. We were in compliance with required ratios and other terms and conditions at September 30, 2011.
The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.
Reference 1: http://www.xbrl.org/2003/role/presentationRef