11.

Borrowings

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


(amount in thousands)
Rate	Conditions		Maturity		As of December 29, 2017			As of June 30, 2017
Short-term borrowings:
Revolving borrowing:
LIBOR⁽¹⁾ + 1.75% per annum		Repayable in 1 to 6 months		January 2018⁽²⁾	$	39,000		$	34,000
Short-term loans from bank:
Bank Base rate +1.85% per annum		Repayable based on credit terms of secured accounts receivable				—			1,003
Current portion of long-term borrowing						13,600			13,600

						52,600			48,603
Less: Unamortized debt issuance costs						(157	)		(201	)

					$	52,443		$	48,402

Long-term borrowings:
Term loan borrowing:
LIBOR +1.75% per annum		Repayable in quarterly installments		May 2019	$	29,600		$	36,400

Less: Current portion						(13,600	)		(13,600	)
Unamortized debt issuance costs						(31	)		(99	)

Non-current portion					$	15,969		$	22,701

⁽¹⁾	LIBOR is London Interbank Offered Rate.

⁽²⁾	In December 2017, the maturity date was extended to January 2018.

The movements of long-term loans for the six months ended December 29, 2017 and December 30, 2016 were as follows:


	Six Months Ended
(amount in thousands)	December 29, 2017			December 30, 2016
Opening balance	$	36,400		$	54,500
Repayments during the period		(6,800	)		(9,800	)

Closing balance	$	29,600		$	44,700

As of December 29, 2017, future maturities of long-term debt during each fiscal year were as follows:


(amount in thousands)
2018 (remaining six months)	$	6,800
2019		22,800

Total	$	29,600

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 terminates and all amounts outstanding are 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. On July 22, 2016, the Company entered into the Fourth Amendment to the Facility Agreement to change the timing of filing certain financial information with the bank. The Company fully drew down the term loan facility in fiscal year 2016. As of December 29, 2017, $39.0 million of the revolving borrowing and $29.6 million of the term loan borrowing was outstanding under the Facility Agreement, resulting in available credit facilities of $111.0 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 2017, 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 2018.

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.

On July 24, 2017, the Company entered into an interest rate swap agreement (the “Swap Agreement”), which the Company did not designate as hedging instruments. The Swap Agreement was used to mitigate interest rate risk and improve the interest rate profile of the Company’s debt obligations. The terms of the Swap Agreement effectively convert the floating interest rate of the term loans under the Facility Agreement to the fixed interest rate of 1.55% per annum through maturity of the term loan in May 2019. The swap transactions are due and settled monthly. During the six months ended December 29, 2017, the Company included a net loss of $23.0 thousand from the settlement of the Swap Agreement as interest expenses in the unaudited condensed consolidated statements of operations and comprehensive income.

Fabrinet’s obligations under the Facility Agreement are guaranteed by certain of its existing and future direct material of its 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 29, 2017, 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 buildings in the United States and 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 business acquisition in the first quarter of fiscal year 2017, the Company assumed a secured borrowing agreement. In the first quarter of fiscal year 2018, the Company fully repaid these short-term loans and sent a notification letter to the bank to terminate this secured borrowing agreement. As a result, the bank released secured trade accounts receivable and the way chattels mortgage over the plant and machine of Fabrinet UK.

Undrawn available credit facilities classified by availability period of future borrowing as of December 29, 2017 and June 30, 2017 were as follows:


(amount in thousands)	December 29, 2017		June 30, 2017
Short-term	$	—	$	1,965
Long-term	$	111,000	$	116,000