Debt

6 Months Ended

Jun. 30, 2013

13.

Debt

Senior Secured Credit Facilities

On February 6, 2013, the Company completed a refinancing of its Term Loan Facility (the “Term Loan Facility”) through a 2^nd amendment (the “Amendment”) to its credit agreement (the “Senior Secured Credit Facilities”). The terms of the Amendment provide for, among other things, the following:

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a reduction of the Company’s LIBOR borrowing rate from LIBOR plus 3.25% to LIBOR plus 2.75%;

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a reduction of the LIBOR floor from 1.25% to 1.00%; and

•

an extension of the commencement date for amortization payments on the Term Loan Facility to June 30, 2013 (not giving consideration to application of the 2012 ECF payment).

As of the date of the refinancing, the Company’s outstanding borrowings under the Term Loan Facility were $1.302 billion. The Company determined that the refinancing resulted in a modification of approximately $1.1 billion of the outstanding balance due and an extinguishment of approximately $180.9 million of the outstanding balance due.

Prior to the February 2013 refinancing, the Company had debt financing costs and original issue discount (“OID”) of $26.0 million and $27.9 million, respectively, recorded in its Condensed Consolidated Balance Sheet. The debt financing costs were included within Deferred financing cost, net and the OID was included within Borrowings, net of current portion and original issue discount and both balances were being amortized as non-cash interest expense over the remaining term of the Term Loan Facility using the effective interest rate method. In connection with the February 2013 refinancing, the Company incurred additional debt financing costs of $3.1 million, all of which represented direct issuance costs. Of this amount $2.7 million was expensed as loss on extinguishment of debt during the six months ended June 30, 2013 and $0.4 million is being amortized as a non-cash interest expense over the remaining term of the amended Term Loan Facility using the effective interest rate method.

As a result of the February 2013 refinancing, the Company recorded a $10.2 million charge in its Condensed Consolidated Statement of Operations as an extinguishment of debt for the six months ended June 30, 2013. This charge included $3.6 million of debt financing costs, $3.9 million of OID and $2.7 million of direct issuance costs as described above.

At June 30, 2013, the Company has recorded debt financing costs of $24.6 million in its Condensed Consolidated Balance Sheet within Deferred financing costs, net, and $22.0 million composed of early payment fees paid to lenders and OID included within Borrowings, net of current portion and original issue discount. These amounts are being amortized as a non-cash interest expense over the remaining amended term of the Term Loan Facility using the effective interest rate method.

Total amortization of deferred financing costs and original issue discounts related to the Senior Secured Credit Facilities was approximately $2.8 million and $5.8 million, respectively, in the three and six months ended June 30, 2013, and $3.2 million and $6.7 million for the three and six months ended June 30, 2012, respectively, and is recorded as interest expense in the Company’s Condensed Consolidated Statements of Operations.

During the three and six months ended June 30, 2013 and 2012, the Company recorded and paid interest on the Term Loan Facility of $12.5 million and $14.8 million, respectively and $25.3 and $30.0 million, respectively. During the three and six months ended June 30, 2013 and 2012, the Company recorded and paid commitment fees on the Revolving Credit Facility of $0.2 million and $0.2 million, respectively and $0.4 and $0.5 million, respectively.

The Senior Secured Facilities include a Revolving Credit Facility providing for aggregate borrowings of up to $160.0 million with sub-limits of $40.0 million for letters of credit and $30.0 million for same-day notice borrowings. As of June 30, 2013 and December 31, 2012, the Company had $1.1 million and $4.5 million, respectively, of letters of credit outstanding, related to certain operating leases and no other borrowings outstanding under the Revolving Credit Facility. The Company’s applicable margin is 4.75% based on it attaining a predetermined leverage ratio established in the Senior Secured Credit Facilities. Interest on the outstanding borrowings and a commitment fee on the unutilized portion of the Revolving Credit Facility are payable at the end of each calendar quarter. Principal amounts outstanding under the Revolving Credit Facility are due and payable in full at maturity.

During each of the three and six month periods ended June 30, 2013 and 2012, the Company recorded and paid commitment fees on letters of credit of $0.1 million and less than $0.1 million, respectively.

Borrowings under the Term Loan Facility bear interest at a rate equal to, at the Company’s option, either (a) the LIBOR rate plus an applicable margin or (b) the highest of (1) the prime commercial lending rate publicly announced by Bank of America as the “prime rate,” (2) the federal funds effective rate plus 0.50% and (3) the one-month LIBOR rate plus 1.00%, plus an applicable margin. Regardless of whether actual LIBOR rates fall below 1.00% (as they have in recent periods), for purposes of determining the Term Loan Facility interest rate, the LIBOR rate is subject to a floor of 1.00%. Prior to the February 2013 refinancing, the LIBOR
applicable margin was 3.25%. Following the February 2013 refinancing, the LIBOR applicable margin is 2.75%. The highest of the three rates in (b) was 5.00% for the quarter ended June 30, 2013. Since the inception of the Term Loan Facility, the Company has elected the three-month LIBOR rate. At June 30, 2013, the Term Loan Facility interest rate was 3.75%, composed of a LIBOR floor of 1.00% plus the applicable margin of 2.75%. As noted above, the Company designated as accounting hedges three interest rate caps related to the Term Loan Facility with notional amounts of $575.0 million as of June 30, 2013. Refer to Note 14, “Derivatives” for further discussion.

The Term Loan Facility amortizes in equal quarterly installments in aggregate annual amounts equal to 1% of the funded principal amount of the Term Loan Facility, or $3.3 million per quarter, beginning with the quarter ended June 30, 2013 (subject to the application of the 2012 annual excess cash flow mandatory prepayment described below) with any remaining unpaid principal balance being payable on the February 11, 2018 maturity date.

In addition to paying interest on outstanding principal under the Senior Secured Credit Facilities, the Company is required to pay a commitment fee of 0.75% per annum to the lenders under the Revolving Credit Facility for the amount of unutilized commitments. The commitment fee percentage may be reduced to 0.50% subject to the Company reducing its total leverage ratio, as defined in the Senior Secured Credit Facilities agreement, to 5.0:1.0. During the quarter ended June 30, 2013, the Company’s total leverage ratio was below the 5.0:1.0 threshold and the commitment fee was 0.50%. The Company is also required to pay customary letter of credit fees.

The Senior Secured Credit Facilities contain certain mandatory prepayment requirements. These include: (i) a percentage of annual excess cash flow (“ECF”), (ii) payments related to certain asset sales, and (iii) payments of the cash proceeds of certain types of newly incurred debt. Determination of any mandatory prepayment amount is based on pre-established formulas as set forth in the credit agreement. The determination of the 2012 ECF payment was made as of and for the Company’s fiscal year ended December 31, 2012, with the ECF prepayment due 90 days from that date. Because the Company achieved a total leverage ratio of 4.75:1.0, the ECF payment percentage was stepped down from 50% of ECF to 25% of ECF. The 2011 ECF payment percentage was 50%. The amount determined to be payable as the 2012 ECF payment at December 31, 2012 was $20.3 million, and accordingly this amount was reflected as current in the Company’s Condensed Consolidated Balance Sheets as of December 31, 2012.

Pursuant to the terms of the credit agreement, individual lenders may opt to refuse their share of any ECF payment. In the first quarter of 2013, but after the filing of the Company’s Annual Report on Form 10-K for the year ended December 31, 2012, certain lenders elected to refuse their portion of the 2012 ECF payment. For the Company’s 2012 ECF payment, refusals totaled approximately $16.6 million. The aggregate refused amount was reclassified and is reflected as long-term in the Company’s Consolidated Balance Sheet at June 30, 2013.

In accordance with the terms of the credit agreement, ECF payments that are not refused are applied toward future scheduled quarterly principal amortization payments in direct order of maturity. Consequently, the $3.7 million 2012 ECF payment made during the three months ended March 31, 2013 satisfied the $3.3 million June 30, 2013 quarterly principal installment, and the remaining $0.4 million will be applied toward the September 30, 2013 quarterly principal installment, reducing the required September 2013 installment from $3.3 million to $2.9 million.

The amount that may be payable as a mandatory excess cash flow payment in 2014 cannot currently be reliably estimated and therefore no portion of the Company’s outstanding debt from its Senior Secured Credit Facilities related to the ECF mandatory prepayment provision is reflected as current for the quarter ended June 30, 2013.

The Company may voluntarily repay outstanding loans under the Senior Secured Credit Facilities at any time without premium or penalty, other than customary breakage costs with respect to LIBOR loans and other than a 1% premium in connection with certain repricing transactions consummated within the first six months of the Amendment.

All obligations under the Senior Secured Credit Facilities are unconditionally guaranteed by Intermediate and each existing and subsequently acquired or organized direct or indirect wholly-owned domestic subsidiary of the Company (subject to certain exceptions).

All obligations under the Senior Secured Credit Facilities and the guarantees of such obligations are secured, subject to permitted liens and other exceptions, by substantially all of the assets of the Company and each subsidiary guarantor, including (i) a perfected pledge of all the equity interests of the Company and each wholly-owned subsidiary of the Company directly held by the Company or a subsidiary guarantor (limited to 65% of voting stock in the case of foreign subsidiaries) and (ii) a perfected security interest in substantially all tangible and intangible personal property and material fee-owned real property of the Company and the subsidiary guarantors (subject to certain exclusions).

The Senior Secured Credit Facilities contain a number of covenants that, among other things, restrict the Company’s ability to incur additional indebtedness, create liens, enter into sale and leaseback transactions, engage in mergers or consolidations, sell or transfer assets, pay dividends and distributions or repurchase its capital stock, make investments, loans or advances, prepay certain subordinated indebtedness, make certain acquisitions, engage in certain transactions with affiliates, amend material agreements governing certain subordinated indebtedness, and change its fiscal year. The Senior Secured Credit Facilities also require the Company to maintain a maximum senior secured debt leverage ratio and a minimum cash interest coverage ratio, and contain other customary affirmative covenants and events of default.

The Company is required to maintain and report quarterly to the lenders the following financial covenants:

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A minimum cash interest coverage ratio; and

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A maximum net total leverage ratio.

The Senior Secured Credit Facilities also contain certain customary affirmative covenants and events of default, including a change of control. If an event of default occurs, the lenders under the Senior Secured Credit Facilities will be entitled to take various actions, including the acceleration of all amounts due under the Senior Secured Credit Facilities and all actions permitted to be taken by a secured creditor.

As of June 30, 2013 and December 31, 2012, the Company was in compliance with the Senior Secured Credit Facilities covenants.

Senior Notes due 2018

On July 29, 2010, the Company issued $700.0 million 10.25% senior notes (the “Senior Notes”) which mature on August 1, 2018, pursuant to an indenture, dated as of July 29, 2010 (the “Indenture”), among the Company, the guarantors party thereto and The Bank of New York Mellon Trust Company, N.A., as trustee.

The Senior Notes are the Company’s senior unsecured obligations and rank senior in right of payment to any future subordinated indebtedness; rank equally in right of payment with all of the Company’s existing and future senior indebtedness; are effectively subordinated in right of payment to the Company’s existing and future secured obligations, including indebtedness under the Company’s Senior Secured Credit Facilities, to the extent of the value of the assets securing such obligations; and are effectively subordinated in right of payment to all existing and future indebtedness and other liabilities of the Company’s non-guarantor subsidiaries (other than indebtedness and liabilities owed to the Company or one of the Company’s guarantor subsidiaries).

The Senior Notes are fully and unconditionally guaranteed on a senior unsecured basis by each of the Company’s existing and future direct or indirect wholly owned domestic subsidiaries that guarantee the Company’s obligations under its Senior Secured Credit Facilities.

Each subsidiary guarantee ranks senior in right of payment to all future subordinated indebtedness of the subsidiary guarantor; ranks equally in right of payment with all existing and future senior indebtedness of the subsidiary guarantor; is effectively subordinated in right of payment to all existing and future secured obligations of the subsidiary guarantors, including their guarantee of indebtedness under the Company’s Senior Secured Credit Facilities, to the extent of the value of the assets securing such indebtedness; and is effectively subordinated in right of payment to all existing and future indebtedness and other liabilities, including trade payables, of any subsidiary that is not also a guarantor of the Senior Notes. Any subsidiary guarantee of the Senior Notes will be released in the event such guarantee is released under the Senior Secured Credit Facilities. The Senior Notes are unsecured, and, as such, no assets are pledged for this agreement.

Interest on the Senior Notes accrues at the rate of 10.25% per annum and is payable semi-annually in arrears on February 1 and August 1, having commenced on February 1, 2011, to holders of the notes of record on the immediately preceding January 15 and July 15. During both the six months ended June 30, 2013 and 2012, the Company paid interest on the Senior Notes of $35.9 million.

Optional Redemption

At any time prior to August 1, 2014, the Company may redeem all or a part of the Senior Notes at a redemption price equal to 100% of the principal amount of the notes redeemed plus the greater of (1) 1.0% of the principal amount of the notes; and (2) the excess, if any, of (a) the present value at such redemption date of (i) the redemption price of the notes at August 1, 2014 (as set forth in the table appearing below), plus (ii) all required interest payments due on the notes through August 1, 2014 (excluding accrued but unpaid interest to such redemption date), computed using a discount rate equal to the applicable treasury rate as of such redemption date plus 50 basis points; over (b) the then outstanding principal amount of the notes (as of, and accrued and unpaid interest and additional interest, if any, to the date of redemption), subject to the rights of holders of notes on the relevant record date to receive interest due on the relevant interest payment date.

On and after August 1, 2014, the Company may redeem the Senior Notes in whole or in part, at the redemption prices (expressed as percentages of the principal amount of the notes to be redeemed) set forth below, plus accrued and unpaid interest thereon and additional interest, if any, to the applicable redemption date, subject to the right of holders of record of the Senior Notes on the relevant record date to receive interest due on the relevant interest payment date, if redeemed during the twelve-month period beginning on August 1 of each of the years indicated below:


Year	Percentage
2014		105.125	%
2015		102.563	%
2016 and thereafter		100.000	%

In addition, prior to August 1, 2013, the Company may, at its option, on one or more occasions redeem up to 35% of the aggregate principal amount of Senior Notes at a redemption price equal to 110.250% of the aggregate principal amount thereof, plus accrued and unpaid interest thereon and additional interest, if any, to the applicable redemption date, subject to the right of holders of record of the Senior Notes on the relevant record date to receive interest due on the relevant interest payment date, with the net cash proceeds of one or more equity offerings; provided that at least 50% of the sum of the aggregate principal amount of Senior Notes issued under the Indenture and the original principal amount of any additional Senior Notes that are Senior Notes issued under the Indenture after the issue date remains outstanding immediately after the occurrence of each such redemption; provided further that each such redemption occurs within 90 days of the date of closing of each such equity offering. This option is required to be bifurcated for accounting purposes as an embedded derivative in the Company’s Senior Notes. The Company has estimated the value of this option to be nominal as of June 30, 2013 and December 31, 2012. This call feature is being marked to market over the period it is active.

Upon the occurrence of a change of control, which is defined in the Indenture, each holder of the Senior Notes has the right to require the Company to repurchase some or all of such holder’s Senior Notes at a purchase price in cash equal to 101% of the principal amount thereof, plus accrued and unpaid interest, if any, to the repurchase date.

The Indenture contains covenants limiting the Company’s ability and the ability of its restricted subsidiaries to incur additional debt or issue certain preferred shares, pay dividends on or make other distributions in respect of the Company’s capital stock or make other restricted payments, make certain investments, sell or transfer certain assets, create liens on certain assets to secure debt, consolidate, merge, sell or otherwise dispose of all or substantially all of the Company’s assets, enter into certain transactions with the Company’s affiliates, and designate the Company’s subsidiaries as unrestricted subsidiaries.

The Indenture also provides for other customary warranties and nonfinancial covenants which, if violated, would create events of default and would permit or require the principal of and accrued interest on the Senior Notes to become or to be declared due and payable.

As of June 30, 2013 and December 31, 2012, the Company was in compliance with the covenants included in the Indenture.

In connection with the Senior Notes, the Company incurred debt financing costs of $19.2 million, of which $10.5 million represented direct issuance costs and commitment fees paid to the underwriters and $8.7 million represented transaction costs incurred with third parties. These costs were capitalized as deferred financing costs and reported in Deferred financing costs, net on the Condensed Consolidated Balance Sheets at June 30, 2013 and December 31, 2012, net of amortization for the six months ending June 30, 2013 and for the year ended December 31, 2012, respectively. These costs are being amortized over the term of each debt instrument using the effective interest rate method.

At June 30, 2013 and December 31, 2012, the Company had $29.9 million of unpaid interest on the Senior Notes accrued in its Condensed Consolidated Balance Sheets. During the three and six months ended both June 30, 2013 and 2012, the Company recorded $1.1 million, and $2.3 million, respectively, of amortized interest expense, related to the capitalized debt financing costs and debt discount accretion, in its Condensed Consolidated Statements of Operations.

The original issue discount with regard to the Senior Notes totaled $17.5 million at July 29, 2010. The original issue discount is being amortized over the life of the loan using the effective interest rate method.

Total Borrowings

Total borrowings consisted of the following at:


(in thousands)	June 30, 2013			December 31, 2012

Short-Term Debt:
Revolving Credit Facility	$	—		$	—
Term Loan Facility (1)		12,663			20,258

Net Short-Term Debt:	$	12,663		$	20,258

Long-Term Debt:
Term Loan Facility	$	1,288,687		$	1,282,624
Senior Notes		700,000			700,000
Less Original Issue Discount—Term Loan		(22,047	)		(28,477	)
Less Original Issue Discount—Senior Notes		(11,171	)		(12,260	)

Net Long-Term Debt	$	1,955,469		$	1,941,887

The future minimum principal payments due under the Senior Secured Credit Facilities and for the Senior Notes due 2018 are as follows (in thousands):


Year Ending December 31,	Principal Payments
Remainder of 2013	$	6,138
2014 (1)		13,050
2015		13,050
2016		13,050
2017		13,050
2018 and thereafter		1,943,012


Total	$	2,001,350

(1)

The amount that may be payable under the Senior Secured Credit Facilities as a mandatory excess cash flow payment in 2014 cannot currently be reliably estimated and therefore no portion of the Company’s outstanding debt from its Senior Secured Credit Facilities related to this prepayment provision is reflected as current for the quarter ended June 30, 2013.

Igloo Holdings Senior PIK Toggle Notes Due 2017

On December 18, 2012, Holdings issued the Toggle Notes pursuant to the Toggle Notes Indenture. The Toggle Notes are structurally subordinated to the Senior Notes and any other indebtedness and other liabilities of the Company and other subsidiaries of Holdings. Claims of creditors of the Company and such other Holdings subsidiaries, including trade creditors, the Senior Secured Credit Facilities lenders and claims of preferred stockholders will have priority with respect to the assets and earnings over the claims of Holdings’ creditors, including the holders of the Toggle Notes. The Company and its subsidiaries are not guarantors or obligors of the Toggle Notes. In addition, the Toggle Notes are unsecured. None of the Company’s assets, or any of its subsidiaries’ assets, are pledged to secure the Toggle Notes. Holdings is the Company’s indirect parent company with no material operations of its own and only limited assets or operations other than the indirect ownership of all of the Company’s capital stock. Accordingly, Holdings is dependent upon the distribution of the earnings of its subsidiaries, whether in the form of dividends, advances, payments on account of intercompany obligations or otherwise, to service its debt obligations. Therefore, subject to the limitations placed upon the Company by the covenants under the Senior Secured Credit Facilities and the Indenture governing the Senior Notes due 2018, the Company plans to provide Holdings, through the declaration and payment of cash dividends, the funds required by Holdings to service the Toggle Notes on at least a semi-annual basis starting with the payment due on June 15, 2013. Interest payments on the Toggle Notes are due June 15 and December 15 of each year until maturity. The amount of the semi-annual dividend that the Company plans to pay Holdings, subject to compliance with its own debt covenants, is $14.4 million (with the exception of the first dividend payment made on June 15, 2013 which equated to $14.3 million due to the interest period not covering a full 6 months), which is equal to the semi-annual Toggle Note interest payment.

- Definition

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.

+ References+ Details

INTERACTIVE DATA CORP/MA/ 10-Q