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Borrowings | 3 Months Ended
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Mar. 31, 2018
Debt Disclosure [Abstract] |
Borrowings | Borrowings Broker-Dealer Credit Facilities The Company is a party to two secured credit facilities with a 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 collateralized by one of the Company’s broker-dealer subsidiaries trading and deposit account with the financial institution. On November 3, 2017, the Company entered the second credit facility (“Revolving Credit Facility”) with the same financial institution for an aggregated borrowing limit of $500.0 million. The Revolving Credit Facility consists two borrowing bases: Borrowing Base A Loan is to be used to finance the purchase and settlement of securities; Borrowing Base B Loan is to be used to fund margin deposit with the NSCC. Each of the three broker-dealers has a sublimit under Borrowing Base A Loan, from $25 million to $500 million, which bears interest at the adjusted LIBOR or base rate plus 1.25% per annum. Two out of the three broker-dealers have sublimit under Borrowing Base B Loan, from $40 million to $100 million, which bears interest at the adjusted LIBOR or base rate plus 2.50% per annum. A commitment fee of 0.50% per annum on the average daily unused portion of this facility is payable quarterly in arrears. The following summarizes the Company’s broker-dealer credit facilities carrying value, net of unamortized debt issuance costs, where applicable:
|  | At March 31, 2018
(in thousands) |  | Interest Rate |  | Financing Available |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |
Uncommitted facility |  | 2.68% |  | $ | 350,000 |  |  | $ | 17,500 |  |  | $ | (1,580 | ) |  | $ | 15,920 |
Revolving credit facility |  | 3.13% |  | 500,000 |  |  | 7,000 |  |  | (1,976 | ) |  | 5,024 |
|  |  |  | $ | 850,000 |  |  | $ | 24,500 |  |  | $ | (3,556 | ) |  | $ | 20,944 |
|  | At December 31, 2017
(in thousands) |  | Interest Rate |  | Financing Available |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |
Uncommitted facility |  | 2.42% |  | $ | 150,000 |  |  | $ | 25,000 |  |  | $ | — |  |  | $ | 25,000 |
Revolving credit facility |  | 2.81% |  | 500,000 |  |  | 7,000 |  |  | (4,117 | ) |  | 2,883 |
|  |  |  | $ | 650,000 |  |  | $ | 32,000 |  |  | $ | (4,117 | ) |  | $ | 27,883 |
The following summarizes interest expense for the broker-dealer facilities. Interest expense is included within interest and dividends expense in the accompanying condensed consolidated statements of comprehensive income.
|  | Three Months Ended March 31,
(in thousands) |  | 2018 |  | 2017
Broker-dealer credit facilities: |  |  |  |
Uncommitted facility |  | $ | 446 |  |  | $ | 415 |
Committed facility (1) |  | — |  |  | 7 |
Revolving credit facility |  | 98 |  |  | — |
|  | $ | 544 |  |  | $ | 422 |
(1) Facility was terminated in July 2017. 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.
|  | At March 31, 2018
|  | Weighted Average Interest Rate |  | Financing Available |  | Borrowing Outstanding
Short-Term Credit Facilities: |  |  |  |  |  |
Short-term credit facilities (2) |  | 4.04% |  | $ | 535,000 |  |  | $ | 131,382 |
|  |  |  | $ | 535,000 |  |  | $ | 131,382 |
|  | At December 31, 2017
|  | Weighted Average Interest Rate |  | Financing Available |  | Borrowing Outstanding
Short-Term Credit Facilities: |  |  |  |  |  |
Short-term credit facilities (2) |  | 3.86% |  | $ | 543,000 |  |  | $ | 205,677 |
|  |  |  | $ | 543,000 |  |  | $ | 205,677 |
(2) Outstanding borrowings were included with receivable from/ payable to broker-dealers and clearing organization within the condensed consolidated statements of financial condition. Interest expense in relation to the facilities for the three months ended March 31, 2018 and 2017 was approximately $1.5 million and $1.7 million, respectively. Long-Term Borrowings The following summarizes the Company’s long-term borrowings, net of unamortized discount and debt issuance costs, where applicable:
|  |  |  | At March 31, 2018
(in thousands) |  | Maturity Date |  | Interest Rate |  | Outstanding Principal |  | Discount |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |
Fourth Amended and Restated Credit Agreement |  | December 2021 |  | 4.94% |  | $ | 624,000 |  |  | $ | (650 | ) |  | $ | (13,101 | ) |  | $ | 610,249 |
Senior secured Second Lien Notes |  | June 2022 |  | 6.75% |  | 500,000 |  |  | — |  |  | (21,673 | ) |  | 478,327 |
SBI bonds |  | January 2020 |  | 5.00% |  | 32,932 |  |  | — |  |  | (44 | ) |  | 32,888 |
|  |  |  |  |  | $ | 1,156,932 |  |  | $ | (650 | ) |  | $ | (34,818 | ) |  | $ | 1,121,464 |
|  |  |  | At December 31, 2017
(in thousands) |  | Maturity Date |  | Interest Rate |  | Outstanding Principal |  | Discount |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |
Fourth Amended and Restate Credit Agreement |  | December 2021 |  | 5.13% |  | $ | 900,000 |  |  | $ | (999 | ) |  | $ | (18,504 | ) |  | $ | 880,497 |
Senior secured Second Lien Notes |  | June 2022 |  | 6.75% |  | 500,000 |  |  | — |  |  | (22,961 | ) |  | 477,039 |
SBI bonds |  | January 2020 |  | 5.00% |  | 31,059 |  |  | — |  |  | (47 | ) |  | 31,012 |
|  |  |  |  |  | $ | 1,431,059 |  |  | $ | (999 | ) |  | $ | (41,512 | ) |  | $ | 1,388,548 |
Fourth Amended and Restated Credit Agreement To finance the Acquisition, on June 30, 2017, Virtu Financial and VFH Parent LLC (“VFH”) entered into a fourth amended and restated credit agreement (the “Fourth Amended and Restated Credit Agreement”) with the lenders party thereto and JPMorgan Chase Bank, N.A., as administrative agent, sole lead arranger and bookrunner, which amended and restated in its entirety the existing Credit Agreement, and upon the closing of the Acquisition of KCG, provided for an aggregate $1.15 billion of first lien secured term loans (the “Term Loan Facility”). For the three months ended March 31, 2018, $276.0 million of prepayments were made under the Fourth Amended and Restated Credit Agreement, for an aggregate total of $526.0 million of principal prepayments under the Term Loan Facility since its closing. VFH also entered into a repricing transaction during January 2018 to reprice the senior secured term loans under the Fourth Amended and Restated Credit Agreement at LIBOR plus 3.25%. In connection with the debt refinancing and the debt prepayment, the Company accelerated approximately $6.0 million unamortized financing costs incurred that were scheduled to be amortized over the term of the loan, including original issue discount and underwriting and legal fees, which is included within debt issue cost related to debt refinancing in the consolidated statements of comprehensive income. The Fourth Amended and Restated Credit Agreement contains certain customary covenants and certain customary events of default, including relating to a change of control. If an event of default occurs and is continuing, the lenders under the Fourth Amended and Restated Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Fourth Amended and Restated Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Fourth Amended and Restated Credit Agreement. Senior Secured Second Lien Notes To finance the Acquisition, on June 16, 2017, the Escrow Issuer and Orchestra Co-Issuer, Inc. (the “Co-Issuer”) completed the offering of $500.0 million aggregate principal amount of 6.750% Senior Secured Second Lien Notes due 2022 (the “Notes”). The Notes were issued under an Indenture, dated June 16, 2017 (the “Indenture”), among the Escrow Issuer, the Co-Issuer and U.S. Bank National Associations, as trustee and collateral agent. On July 20, 2017, VFH assumed all of the obligations of the Escrow Issuer under the Indenture and the Notes. The Notes are guaranteed by Virtu Financial and each of Virtu Financial’s wholly-owned domestic restricted subsidiaries that guarantees the Fourth Amended and Restated Credit Agreement. The Indenture imposes certain limitations on the Company, and contains certain customary events of default, including, among others, payment defaults related to the failure to pay principal or interest on Notes, covenant defaults, final maturity default or cross-acceleration with respect to material indebtedness and certain bankruptcy events. The gross proceeds from the Notes were deposited into a segregated escrow account with an escrow agent. The proceeds were released from escrow as of the Closing Date and were used to finance, in part, the Acquisition, and to repay certain indebtedness of the Company and KCG. (See Note 3 “Acquisition of KCG Holdings, Inc.” for further details). 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 11 “Financial assets and liabilities”). 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 condensed consolidated statements of comprehensive income. The principal balance was ¥3.5 billion ($32.9 million) as of March 31, 2018 and ¥3.5 billion ($31.0 million) as of December 31, 2017. The Company recorded a loss of $1.9 million and $1.5 million due to the change in currency rates during the three months ended March 31, 2018 and 2017, respectively. Aggregate future required minimum principal payments based on the terms of the long-term borrowings at March 31, 2018 were as follows:
(in thousands) |  |
2018 |  | $ | — |
2019 |  | — |
2020 |  | 32,932 |
2021 and thereafter |  | 1,124,000 |
Total principal of long-term borrowings |  | $ | 1,156,932 |

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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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