11.

Borrowings

The Company’s total borrowings, including short-term and long-term borrowings, consisted of the following:


(amount in thousands)
Rate ⁽¹⁾	Conditions	Maturity	As of December 30, 2016			As of June 24, 2016
Short-term borrowing:
Revolving borrowing:
LIBOR + 1.75% per annum	Repayable in 1 to 6 months	January 2017 ⁽²⁾	$	20,000		$	6,500
Short-term loans from bank:
Bank of England base rate +1.85% per annum	Repayable based on credit terms of secured accounts receivable			3,377			—
Bank of England base rate + 2.2% per annum⁽³⁾	Repayable on monthly basis	May 2017		55			—
Current portion of long-term borrowing				15,100			18,100

				38,532			24,600
Less: Unamortized debt issuance costs				(245	)		(293	)

			$	38,287		$	24,307

Long-term borrowing:
LIBOR + 2.8% per annum	Repayable in quarterly installments	March 2017	$	1,500		$	4,500
Term loan borrowing:
LIBOR +1.75% per annum	Repayable in quarterly installments	May 2019		43,200			50,000

				44,700			54,500
Less: Current portion				(15,100	)		(18,100	)
Unamortized debt issuance costs				(188	)		(300	)

Non-current portion			$	29,412		$	36,100

⁽¹⁾	LIBOR is London Interbank Offered Rate.

⁽²⁾	In December 2016, the maturity date was extended to January 2017.

⁽³⁾

As of December 30, 2016, the carrying amount of plant and machinery of Exception EMS secured to such loan was $4.3 million. Under the conditions stipulated in the loan agreement, this loan will be cross securitized, cross default and co-terminus with the short terms of loans of $3.4 million which are secured by accounts receivable.

Under the long-term borrowing contract of a subsidiary, the loan is secured by certain property, plant and equipment of the subsidiary. The carrying amount of assets secured and pledged as collateral to such loan as of December 30, 2016 and June 24, 2016 was $46.4 million and $47.7 million, respectively. This subsidiary is also required to comply with maximum ratios of debt to equity and minimum levels of debt service coverage ratios, and Fabrinet must maintain an effective shareholding ratio. The carrying amounts of bank borrowings approximate their fair value.

As of December 30, 2016 and June 24, 2016, the Company was in compliance with its bank borrowing agreements. In addition to financial ratios, certain of the Company’s credit facilities include customary events of default.

The movements of long-term loans were as follows for the six months ended December 30, 2016 and December 25, 2015:


	Six Months Ended
(amount in thousands)	December 30, 2016			December 25, 2015
Opening balance	$	54,500		$	10,500
Repayments during the period		(9,800	)		(3,000	)

Closing balance	$	44,700		$	7,500

As of December 30, 2016, future maturities of long-term debt during each fiscal year were as follows:


(amount in thousands)
2017 (remaining six months)	$	8,300
2018		13,600
2019		22,800

Total	$	44,700

Credit facilities:

Fabrinet entered into a syndicated senior credit facility agreement (the “Facility Agreement”) with a consortium of banks on May 22, 2014. The Facility Agreement, led by Bank of America, provides for a $200.0 million credit line, comprised of a $150.0 million revolving loan facility and a $50.0 million delayed draw term loan facility. The revolving loan facility contains an accordion feature permitting Fabrinet to request an increase in the facility up to $100.0 million subject to customary terms and conditions and provided that no default or event of default exists at the time of request. The revolving loan facility will be terminated and all amounts outstanding will be due and payable in full on May 22, 2019. The principal amount of any drawn term loans must be repaid according to scheduled quarterly amortization payments, with final payment of all amounts outstanding, plus accrued interest, being due May 22, 2019.

On February 26, 2015, the Company entered into the Second Amendment to the Facility Agreement. The amendment extended the availability period for draws on the term loan facility from May 21, 2015 to July 31, 2015. It also allowed the Company, upon the satisfaction of certain conditions, to designate from time to time one or more of its subsidiaries as borrowers under the Facility Agreement. On July 31, 2015, the Company entered into the Third Amendment to the Facility Agreement. The amendment extended the availability period for draws on the term loan facility from July 31, 2015 to July 31, 2016. As of December 30, 2016, $20.0 million of the revolving borrowing and $43.2 million of the term loan borrowing was outstanding under the Facility Agreement, resulting in available credit facilities of $136.8 million. Borrowings under the revolving credit facility are classified as current liabilities in the unaudited condensed consolidated balance sheets as the Company has the periodic option to renew or pay, all or a portion of, the outstanding balance at the end of the maturity date, which is in the range of one to six months, without premium or penalty, upon notice to the administrative agent. During December 2016, the Company sent notices to the bank to renew the maturity date of its revolving borrowings. The bank approved the notices and extended the maturity to January 2017.

Loans under the Facility Agreement bear interest, at Fabrinet’s option, at a rate per annum equal to a LIBOR rate plus a spread of 1.75% to 2.50%, or a base rate plus a spread of 0.75% to 1.50%, determined in accordance with the Facility Agreement in each case with such spread determined based on Fabrinet’s consolidated total leverage ratio for the preceding four fiscal quarter period. Interest is due and payable quarterly in arrears for loans bearing interest at the base rate and at the end of an interest period (or at each three-month interval in the case of loans with interest periods greater than three months) in the case of loans bearing interest at the LIBOR rate.

Fabrinet’s obligations under the Facility Agreement are guaranteed by certain of its existing and future direct material subsidiaries. In addition, the Facility Agreement is secured by Fabrinet’s present and future accounts receivable, deposit accounts and cash, and a pledge of the capital stock of certain of Fabrinet’s direct subsidiaries. Fabrinet is required to maintain at least $40.0 million of cash, cash equivalents, and marketable securities at financial institutions located in the United States. Further, Fabrinet is required to maintain any of its deposits accounts or securities accounts with balances in excess of $10.0 million in a jurisdiction where a control agreement, or the equivalent under the local law, can be effected.

The Facility Agreement contains customary affirmative and negative covenants. Negative covenants include, among other things, limitations on liens, indebtedness, investments, mergers, sales of assets, changes in the nature of the business, dividends and distributions, affiliate transactions and capital expenditures. The Facility Agreement contains financial covenants requiring Fabrinet to maintain: (1) a minimum tangible net worth of not less than $200.0 million plus 50% of quarterly net income, exclusive of quarterly losses; (2) a minimum debt service coverage ratio of not less than 1.50:1.00; (3) a maximum senior leverage ratio of not more than 2.50:1.00; and (4) a minimum quick ratio of not less than 1.10:1.00. Each of these financial covenants is calculated on a consolidated basis for the consecutive four fiscal quarter period then ended. As of December 30, 2016, the Company was in compliance with all covenants under the Facility Agreement.

The Facility Agreement also contains customary events of default including, among other things, payment defaults, breaches of covenants or representations and warranties, cross-defaults with certain other indebtedness, bankruptcy and insolvency events and change in control of Fabrinet, subject to grace periods in certain instances. Upon an event of default, the lenders may terminate their commitments, declare all or a portion of the outstanding obligations payable by Fabrinet to be immediately due and payable and exercise other rights and remedies provided for under the Facility Agreement.

Fabrinet intends to use the proceeds of the credit line to finance its future manufacturing facility in Thailand, and for general corporate purposes including mergers and acquisitions of complementary manufacturing businesses or technology, although Fabrinet has no current commitments with respect to any such acquisitions.

Short-term loans from bank

In connection with the acquisition of Exception EMS, the Company assumed a secured borrowing agreement that is secured by trade accounts receivable of Exception EMS. As of December 30, 2016, the carrying amount of trade accounts receivable secured to the loans was $6.5 million. The secured borrowing agreement contains certain covenants that Exception EMS is required to comply with: (1) the value of credit notes may not exceed 4% of the value of assigned debts measured on a monthly basis, and (2) rolling cash flow must be provided with the monthly management information. As of December 30, 2016, the subsidiary was in compliance with all covenants under the secured borrowing agreement.

As of December 30, 2016, the Company drew down $3.4 million from this facility, which is recorded as short-term loans in the unaudited condensed consolidated balance sheets. The agreement bears interest for discount charge at 1.85% per annum above Bank of England base rate.

Undrawn available credit facilities classified by availability period of future borrowing as of December 30, 2016 and June 24, 2016 were as follows:


(amount in thousands)	December 30, 2016		June 24, 2016
Short-term	$	3,395	$	1,414
Long-term	$	136,800	$	143,500

As of December 30, 2016, Fabrinet had made a request to drawdown $14.0 million on its available outstanding revolving borrowing. The bank approved the request for drawdown and provided cash to settle this request to Fabrinet on January 3, 2017. Due to the settlement of the transaction taking place after the balance sheet date, the respective cash and loan amount are not recorded in the unaudited condensed consolidated balance sheet as of December 30, 2016.