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Borrowings | 3 Months Ended
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Mar. 31, 2019
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 with an aggregate borrowing limit of $200 million and is collateralized by the trading and deposit account of one of the Company’s broker-dealer subsidiaries maintained at the financial institution. On November 3, 2017, the Company entered into the second credit facility (the “Committed Facility”) with the same financial institution for an aggregate borrowing limit of $500 million. The Committed Facility was subsequently amended and restated March 1, 2019 to increase the borrowing limit to $600 million and to enable a broker-dealer subsidiary of ITG as a borrower thereunder. The Committed Facility consists of 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 National Securities Clearing Corporation. Each of the three broker-dealers has a sublimit under Borrowing Base A Loan, from $400 million to $600 million, which bears interest at the adjusted LIBOR or base rate plus 1.25% per annum. Each of the three broker-dealers has a sublimit under Borrowing Base B Loan, from $40 million to $150 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 values, net of unamortized debt issuance costs, where applicable:
|  | At March 31, 2019
(in thousands) |  | Interest Rate |  | Financing Available |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |
Uncommitted facility |  | 3.40% |  | $ | 200,000 |  |  | $ | 10,000 |  |  | $ | (708 | ) |  | $ | 9,292 |
Committed facility |  | 3.74% |  | 600,000 |  |  | 7,000 |  |  | (930 | ) |  | 6,070 |
|  |  |  | $ | 800,000 |  |  | $ | 17,000 |  |  | $ | (1,638 | ) |  | $ | 15,362 |
|  | At December 31, 2018
(in thousands) |  | Interest Rate |  | Financing Available |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |
Uncommitted facility |  | 3.40% |  | $ | 200,000 |  |  | $ | 10,000 |  |  | $ | (832 | ) |  | $ | 9,168 |
Committed facility |  | 3.75% |  | 500,000 |  |  | 7,000 |  |  | (1,040 | ) |  | 5,960 |
|  |  |  | $ | 700,000 |  |  | $ | 17,000 |  |  | $ | (1,872 | ) |  | $ | 15,128 |
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) |  | 2019 |  | 2018
Broker-dealer credit facilities: |  |  |  |
Uncommitted facility |  | $ | 184 |  |  | $ | 446 |
Committed facility |  | 73 |  |  | 98 |
|  | $ | 257 |  |  | $ | 544 |
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, 2019
|  | Weighted Average Interest Rate |  | Financing Available |  | Borrowing Outstanding
Short-Term Credit Facilities: |  |  |  |  |  |
Short-term credit facilities (1) |  | 5.03% |  | $ | 566,000 |  |  | $ | 136,104 |
|  |  |  | $ | 566,000 |  |  | $ | 136,104 |
|  | At December 31, 2018
|  | Weighted Average Interest Rate |  | Financing Available |  | Borrowing Outstanding
Short-Term Credit Facilities: |  |  |  |  |  |
Short-term credit facilities (1) |  | 5.03% |  | $ | 566,000 |  |  | $ | 184,608 |
|  |  |  | $ | 566,000 |  |  | $ | 184,608 |
(1) Outstanding borrowings are included with Receivables from/ Payables to broker-dealers and clearing organizations within the condensed consolidated statements of financial condition. Interest expense in relation to the facilities was approximately $1.9 million and $1.5 million for the three months ended March 31, 2019 and 2018, respectively. Short-Term Bank Loans The Company’s international securities clearance and settlement activities are funded with operating cash or with short-term bank loans in the form of overdraft facilities. At March 31, 2019, there was $146.3 million outstanding under these facilities at a weighted average interest rate of approximately 2.7% associated with international settlement activities. 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, 2019
(in thousands) |  | Maturity Date |  | Interest Rate |  | Outstanding Principal |  | Discount |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |
First Lien Term Loan Facility |  | March 2026 |  | 6.13% |  | $ | 1,500,000 |  |  | $ | (7,409 | ) |  | $ | (29,904 | ) |  | $ | 1,462,687 |
Senior Secured Second Lien Notes |  | June 2022 |  | 6.75% |  | 500,000 |  |  | — |  |  | (16,524 | ) |  | 483,476 |
SBI bonds |  | January 2020 |  | 5.00% |  | 31,571 |  |  | — |  |  | (18 | ) |  | 31,553 |
|  |  |  |  |  | $ | 2,031,571 |  |  | $ | (7,409 | ) |  | $ | (46,446 | ) |  | $ | 1,977,716 |
|  |  |  | At December 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 Facility |  | December 2021 |  | 5.55% |  | $ | 400,000 |  |  | $ | (332 | ) |  | $ | (6,704 | ) |  | $ | 392,964 |
Senior Secured Second Lien Notes |  | June 2022 |  | 6.75% |  | 500,000 |  |  | — |  |  | (17,811 | ) |  | 482,189 |
SBI bonds |  | January 2020 |  | 5.00% |  | 31,908 |  |  | — |  |  | (24 | ) |  | 31,884 |
|  |  |  |  |  | $ | 931,908 |  |  | $ | (332 | ) |  | $ | (24,539 | ) |  | $ | 907,037 |
Credit Agreement As described in Note 3 “ITG Acquisition”, in connection with the ITG Acquisition, Virtu Financial, VFH and the Acquisition Borrower entered into the Credit Agreement, with the lenders party thereto, Jefferies Finance LLC, as administrative agent and Jefferies Finance LLC and RBC Capital Markets, as joint lead arrangers and joint bookrunners. The Credit Agreement provides (i) a senior secured first lien term loan (the “First Lien Term Loan Facility”) in an aggregate principal amount of $1.5 billion, drawn in its entirety on the ITG Closing Date, with approximately $404.5 million borrowed by VFH to repay all amounts outstanding under the Existing Term Loan Facility (as defined below) and the remaining approximately $1,095 million borrowed by the Acquisition Borrower to finance the consideration and fees and expenses paid in connection with the ITG Acquisition, and (ii) a $50.0 million senior secured first lien revolving facility to VFH, with a $5.0 million letter of credit subfacility and a $5.0 million swingline subfacility. After the ITG Closing Date, VFH assumed the obligations of the Acquisition Borrower in respect of the acquisition term loans. The term loan borrowings and revolver borrowings under the Credit Agreement will bear interest at a per annum rate equal to, at the Company's election, either (i) the greatest of (a) the prime rate in effect, (b) the greater of (1) the federal funds effective rate and (2) the overnight bank funding rate, in each case plus 0.5%, (c) an adjusted LIBOR rate for a Eurodollar borrowing with an interest period of one month plus 1% and (d) 1.00%, plus, in each case, 2.50%, with a stepdown to 2.25% based on VFH’s first lien leverage ratio, or (ii) the greater of (x) an adjusted LIBOR rate for the interest period in effect and (y) 0%, plus, in each case, 3.50%, with a stepdown to 3.25% based on VFH’s first lien leverage ratio. In addition, a commitment fee accrues at a rate of 0.50% per annum on the average daily unused amount of the revolving facility, with stepdowns to 0.375% and 0.25% per annum based on VFH’s first lien leverage ratio, and is payable quarterly in arrears. The revolving facility under the Credit Agreement is subject to a springing net first lien leverage ratio which may spring into effect as of the last day of a fiscal quarter based on the usage of the aggregate revolving commitments as of such date. VFH is also subject to contingent principal prepayments based on excess cash flow and certain other triggering events. Borrowings under the Credit Agreement are guaranteed by Virtu Financial and VFH’s material non-regulated restricted subsidiaries and secured by substantially all of the assets of VFH and the guarantors, in each case, subject to certain exceptions. Under the Credit Agreement, term loans will mature on March 1, 2026; provided that unless at least $400 million of VFH’s existing 6.750% second lien notes due 2022 have been repaid or refinanced (the “repayment requirement”) prior to the date that is 91 days prior to the maturity of the second lien notes (the “term springing maturity date”), the term loans will mature on the term springing maturity date. The term loans amortize in annual installments equal to 1.0% of the original aggregate principal amount of the term loans. The revolving commitments will terminate on March 1, 2022; provided that unless the repayment requirement is satisfied on or prior to the date that is 182 days prior to the maturity of the second lien notes (the “revolving springing maturity date”), the revolving commitments will terminate on the revolving springing maturity date. To finance the Acquisition of KCG, on June 30, 2017, Virtu Financial and VFH previously entered into the Fourth Amended and Restated Credit Agreement which, upon the closing of the Acquisition of KCG, provided for an aggregate $1.15 billion of first lien secured term loans (the “Existing Term Loan Facility”). As described above, the Existing Term Loan Facility was fully terminated following its repayment in full with the proceeds of the First Lien Term Loan Facility. Senior Secured Second Lien Notes To finance the Acquisition of KCG, on June 16, 2017, Orchestra Borrower LLC (the “Escrow Issuer”), a wholly owned subsidiary of Virtu Financial, 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 Association, 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 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 the 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 KCG Closing Date and were used to finance, in part, the Acquisition of KCG, and to repay certain indebtedness of the Company and KCG. 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 ($31.6 million) as of March 31, 2019 and ¥3.5 billion ($31.9 million) as of December 31, 2018. The Company recorded a loss of $0.4 million and a loss of $1.9 million due to the change in currency rates during the three months ended March 31, 2019 and 2018, respectively. At March 31, 2019, aggregate future required minimum principal payments based on the terms of the long-term borrowings were as follows:
(in thousands) |  | March 31, 2019
2019 |  | $ | — |
2020 |  | 46,571 |
2021 |  | 15,000 |
2022 |  | 515,000 |
2023 and thereafter |  | 1,455,000 |
Total principal of long-term borrowings |  | $ | 2,031,571 |

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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://fasb.org/us-gaap/role/ref/legacyRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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