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Borrowings | 3 Months Ended
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Mar. 31, 2017
Borrowings |
Borrowings | 8. Borrowings Outstanding borrowings and financing capacity or unused available capacity under the Company’s borrowing arrangements were as follows:
|  |  | At March 31, 2017 |  | At December 31, 2016 |
|  |  |  | Financing |  |  | Borrowing |  |  | Financing |  |  | Borrowing |
| (in thousands) |  |  | Available |  |  | Outstanding |  |  | Available |  |  | Outstanding |
| Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |  |  |  |
| Uncommitted facility |  | $ | 125,000 |  | $ | 22,000 |  | $ | 125,000 |  | $ | 25,000 |
| Committed facility |  |  | 75,000 |  |  | — |  |  | 75,000 |  |  | — |
|  |  | $ | 200,000 |  | $ | 22,000 |  | $ | 200,000 |  | $ | 25,000 |
| Short-Term Credit Facilities: |  |  |  |  |  |  |  |  |  |  |  |  |
| Short-term credit facilities (1) |  | $ | 493,000 |  | $ | 241,324 |  | $ | 493,000 |  | $ | 309,086 |
|  |  | $ | 493,000 |  | $ | 241,324 |  | $ | 493,000 |  | $ | 309,086 |
_______________________________________
| (1) |  | Outstanding borrowings were included with receivable from broker-dealers and clearing organization within the consolidated statements of financial condition.
|  |  |  |  | At March 31, 2017 |  | At December 31, 2016 |
|  |  | Maturity |  |  | Unused Available |  |  | Borrowing |  |  | Unused Available |  |  | Borrowing |
| (in thousands) |  | Date |  |  | Capacity |  |  | Outstanding |  |  | Capacity |  |  | Outstanding |
| Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |  |  |  |
| Senior secured credit facility |  | October 2022 |  | $ | n/a |  | $ | 533,961 |  | $ | n/a |  | $ | 535,104 |
| Revolving credit facility |  | April 2018 |  |  | 100,000 |  |  | — |  |  | 100,000 |  |  | — |
| SBI bonds |  | January 2020 |  |  | n/a |  |  | 31,356 |  |  | n/a |  |  | 29,853 |
|  |  |  |  | $ | 100,000 |  | $ | 565,317 |  | $ | 100,000 |  | $ | 564,957 |
Broker-Dealer Credit Facilities The Company is a party to two secured credit facilities with the same financial institution to finance overnight securities positions purchased as part of its ordinary course broker-dealer market making activities. One of the facilities (the “Uncommitted Facility”), is provided on an uncommitted basis and is available for borrowings by the Company’s broker-dealer subsidiaries up to a maximum amount of $125.0 million. In connection with this credit facility, the Company has entered into demand promissory notes dated February 20, 2013. The loans provided under the Uncommitted Facility are collateralized by the Company’s broker-dealer trading and deposit accounts with the same financial institution and, bear interest at a rate set by the financial institution on a daily basis (1.91% at March 31, 2017 and 1.66% at December 31, 2016). The Company is party to another facility (the “Committed Facility”) with the same financial institution dated July 22, 2013 and subsequently amended on March 26, 2014, July 21, 2014, April 24, 2015, and July 18, 2016 which is provided on a committed basis and is available for borrowings by one of the Company's broker-dealer subsidiaries up to a maximum of the lesser of $75.0 million or an amount determined based on agreed advance rates for pledged securities. The Committed Facility is subject to certain financial covenants, including a minimum tangible net worth, a maximum total assets to equity ratio, and a minimum excess net capital, each as defined therein. The Committed Facility bears interest at a rate per annum at the Company’s election equal to either an adjusted LIBOR rate or base rate, plus a margin of 1.25% per annum, and has a term of 364 days. Interest expense for the three months ended March 31, 2017 and 2016 was approximately $0.4 million and $0.3 million, respectively. Interest expense is included within interest and dividends expense in the accompanying condensed consolidated statements of comprehensive income. Short-Term Credit Facilities The Company maintains short term credit facilities with various prime brokers and other financial institutions from which it receives execution or clearing services. The proceeds of these facilities are used to meet margin requirements associated with the products traded by the Company in the ordinary course, and amounts borrowed are collateralized by the Company’s trading accounts with the applicable financial institution. Borrowings bore interest at a weighted average interest rate of 3.27% and 3.12% per annum, as March 31, 2017 and December 31, 2016, respectively. Interest expense in relation to the facilities for the three months ended March 31, 2017 and 2016 was approximately $1.7 million and $1.7 million, respectively. Interest expense is recorded within interest and dividends expense in the accompanying condensed consolidated statements of comprehensive income. Long-Term Borrowings Senior Secured Credit Facility On July 8, 2011, Virtu Financial, its wholly owned subsidiary, VFH Parent LLC (“VFH”), and each of its unregulated domestic subsidiaries entered into the credit agreement (the “Credit Agreement”) among VFH, Virtu Financial, Credit Suisse AG, as administrative agent, and the other parties thereto. The Credit Agreement was amended on February 5, 2013, May 1, 2013 and November 8, 2013. On October 27, 2016, Virtu Financial and VFH entered into a third amended and restated credit agreement with JPMorgan Chase Bank, N.A. as administrative agent, lead arranger and bookrunner and BMO Capital Markets Corp., as syndication agent (the “Refinancing Transaction”). The third amended and restated credit agreement amends and restated in its entirety the existing Credit Agreement. Under the third amended and restated credit agreement (i) VFH’s existing term loan facility was replaced by a senior secured first lien term loan in an aggregate principal amount of $540.0 million, drawn in its entirety on the closing date and (ii) VFH’s existing senior secured first lien revolving facility with aggregate commitments of $100.0 million remains in effect. The term loan borrowings under the third amended and restated credit agreement will bear interest at the Company’s election, at either (i) the greatest of (a) the prime rate in effect, (b) the federal funds effective rate plus 0.5% (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1%, and (d) 1.75% plus, in each case, 2.50%, or (ii) greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0.75%, plus, in each case, 3.50%. In addition, the term loans were issued at a discount of 0.25%. Borrowings under the third amended and restated credit agreement continue to be secured by substantially all of VFH’s assets, other than the equity interests in and assets of its subsidiaries that are subject to, or potentially subject to, regulatory oversight, and its foreign subsidiaries, but including 100% of the non-voting stock and 65% of the voting stock of these subsidiaries. Under the terms of the third amended and restated credit agreement, term loans will mature on October 27, 2022, subject to certain exceptions and permitted extensions as set forth in the third amended and restated credit agreement. A portion of certain financing costs incurred in connection with the original credit facility that were scheduled to be amortized over the term of the loan, including original issue discount and underwriting and legal fees, were accelerated at the closing of the refinancing. On April 15, 2015, the Company, Virtu Financial, and each unregulated domestic subsidiary of Virtu Financial, entered into an amendment agreement to the Credit Agreement, which provided for a revolving credit facility with aggregate commitments by revolving lenders of $100.0 million. The revolving credit facility is secured pari passu with the term loans outstanding under the Credit Agreement and is subject to the same financial covenants and negative covenants. Borrowings under the revolving facility bear interest, at the Company’s election, at either (i) the greatest of (a) the prime rate in effect, (b) the federal funds effective rate plus 0.5%, and (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1% and (d) 2.00%, plus, in each case, 2.0%, or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 1.00%, plus, in each case, 3.0%. The Company will also pay a commitment fee of 0.50% per annum on the average daily unused portion of the facility. Under the terms of the third amended and restated credit agreement, revolving commitments will terminate and outstanding revolving loans will mature on April 15, 2018, subject to certain exceptions and permitted extensions as set forth in the third amended and restated credit agreement. SBI Bonds On July 25, 2016, VFH issued Japanese Yen Bonds (collectively the “SBI Bonds”) in the aggregate principal amount of ¥3.5 billion ($33.1 million at issuance date) to SBI Life Insurance Co., Ltd. and SBI Insurance Co., Ltd. The proceeds from the SBI Bonds were used to partially fund the investment in SBI (as described in Note 9). The SBI Bonds were issued bearing interest at the rate per annum of 4.0% until their scheduled maturity on January 6, 2020. Following the consummation of the Refinancing Transaction and in accordance with the terms and conditions of the SBI Bonds, the rate per annum was increased to 5.0% as of October 2016. The SBI Bonds are guaranteed by Virtu Financial. The SBI Bonds are subject to fluctuations on the Japanese Yen currency rates relative to the Company’s reporting currency (U.S. Dollar) with the changes reflected in other, net in the consolidated statements of comprehensive income. The principal balance was ¥3.5 billion ($31.4 million) as of March 31, 2017 and the Company recorded a loss of $1.5 million due to the change in currency rates during the three months ended March 31, 2017. Aggregate future required minimum principal payments based on the terms of the long-term borrowings at March 31, 2017 were as follows:
(in thousands) |  |  |  |
2017 |  | $ | 4,050 |
2018 |  |  | 5,400 |
2019 |  |  | 5,400 |
2020 and thereafter |  |  | 555,221 |
Total principal of long-term borrowings |  | $ | 570,071 |
The below table contains a reconciliation of the long-term borrowings principal amount to the secured credit facility recorded in the condensed consolidated statements of financial condition:
|  |  | At March 31, |  |  | At December 31, |
(in thousands) |  | 2017 |  | 2016 |
Senior secured credit facility outstanding principal |  | $ | 538,650 |  | $ | 540,000 |
SBI Bonds outstanding principal |  |  | 31,421 |  |  | 29,925 |
Net deferred financing fees |  |  | (3,839) |  |  | (4,012) |
Net discount on senior secured credit facility |  |  | (915) |  |  | (956) |
Long-term borrowings |  | $ | 565,317 |  | $ | 564,957 |

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- 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 Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 505 -SubTopic 10 -Section 50 -Paragraph 3 -URI http://asc.fasb.org/extlink&oid=6928386&loc=d3e21475-112644 Reference 2: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 210 -SubTopic 10 -Section S99 -Paragraph 1 -Subparagraph (SX 210.5-02.19,20,22) -URI http://asc.fasb.org/extlink&oid=6877327&loc=d3e13212-122682 + Details
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