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Borrowings | 3 Months Ended
--- | ---
Mar. 31, 2024
Debt Disclosure [Abstract] |
Borrowings | Borrowings Short-term Borrowings, net The following summarizes the Company's short-term borrowing balances outstanding, net of related debt issuance costs, with each described in further detail below.
|  | March 31, 2024
(in thousands) |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Short-term Borrowings, net
Broker-dealer credit facilities |  | $ | 140,000 |  |  | $ | (1,798) |  |  | $ | 138,202 |
|  | $ | 140,000 |  |  | $ | (1,798) |  |  | $ | 138,202 |
|  | December 31, 2023
(in thousands) |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Short-term Borrowings, net
Broker-dealer credit facilities |  | $ | — |  |  | $ | — |  |  | $ | — |
|  | $ | — |  |  | $ | — |  |  | $ | — |
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 U.S. broker-dealer market making activities. One of the facilities (the “Uncommitted Facility”) is provided on an uncommitted basis with an aggregate borrowing limit of $400 million, and is collateralized by VAL's trading and deposit account maintained at the financial institution. The second credit facility (the “Committed Facility”) with the same financial institution has a borrowing limit of $650 million. 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. Borrowing Base A Loans are available up to $650 million and bear interest at the adjusted Secured Overnight Financing Rate (“SOFR”) or base rate plus 1.25% per annum. Borrowing Base B Loans are subject to a sublimit of $300 million and bear interest at the adjusted SOFR 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. On May 25, 2022, Virtu Financial Singapore Pte. Ltd. entered into a revolving credit facility with a financial institution (the "Overdraft Facility") to provide a source of short-term financing. The facility has an aggregate borrowing limit of $10 million, and bears interest at the adjusted SOFR or base rate plus 3.5% per annum. The following summarizes the Company’s broker-dealer credit facilities' carrying values, net of unamortized debt issuance costs, where applicable. These balances are included within Short-term borrowings on the Condensed Consolidated Statements of Financial Condition.
|  | At March 31, 2024
(in thousands) |  | Interest Rate |  | Financing Available |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |
Uncommitted facility |  | 6.50% |  | $ | 400,000 |  |  | $ | 80,000 |  |  | $ | (1,798) |  |  | $ | 78,202 |
Committed facility (1) |  | 6.75% |  | 650,000 |  |  | 50,000 |  |  | — |  |  | 50,000 |
Overdraft facility |  | 8.84% |  | 10,000 |  |  | 10,000 |  |  | — |  |  | 10,000 |
|  |  |  | $ | 1,060,000 |  |  | $ | 140,000 |  |  | $ | (1,798) |  |  | $ | 138,202 |
(1) Interest rate for Borrowing Base A Loan and Borrowing Base B Loan under the Committed Facility was 6.75% and 9.00%, respectively. There was no balance outstanding under Borrowing Base B Loan as of March 31, 2024.
|  | At December 31, 2023
(in thousands) |  | Interest Rate |  | Financing Available |  | Borrowing Outstanding |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |
Uncommitted facility (1) |  | 6.50% |  | $ | 400,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
Committed facility |  | 6.75% |  | 650,000 |  |  | — |  |  | — |  |  | — |
Overdraft facility |  | 8.88% |  | 10,000 |  |  | — |  |  | — |  |  | — |
|  |  |  | $ | 1,060,000 |  |  | $ | — |  |  | $ | — |  |  | $ | — |
(1) $2.3 million of deferred debt issuance costs are included within Other assets on the Consolidated Statement of Financial Condition.
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) |  |  |  |  |  | 2024 |  | 2023 |  |
Broker-dealer credit facilities: |  |  |  |  |  |  |  |  |  |
Uncommitted facility |  |  |  |  |  | $ | 601 |  |  | $ | 1,561 |  |  |
Committed facility |  |  |  |  |  | 877 |  |  | — |  |  |
Overdraft facility |  |  |  |  |  | 113 |  |  | 92 |  |  |
|  |  |  |  |  | $ | 1,591 |  |  | $ | 1,653 |  |  |
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, 2024 and December 31, 2023, there was no balance associated with international settlement activities outstanding under these facilities. Outstanding short-term bank loan balances are included within Short-term borrowings on the Condensed Consolidated Statements of Financial Condition. Prime Brokerage 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, 2024
(in thousands) |  | Weighted Average Interest Rate |  | Financing Available |  | Borrowing Outstanding
Prime Brokerage Credit Facilities: |  |  |  |  |  |
Prime brokerage credit facilities (1) |  | 7.83% |  | $ | 598,214 |  |  | $ | 170,713 |
|  |  |  | $ | 598,214 |  |  | $ | 170,713 |
|  | At December 31, 2023
(in thousands) |  | Weighted Average Interest Rate |  | Financing Available |  | Borrowing Outstanding
Prime Brokerage Credit Facilities: |  |  |  |  |  |
Prime brokerage credit facilities (1) |  | 7.96% |  | $ | 599,180 |  |  | $ | 175,256 |
|  |  |  | $ | 599,180 |  |  | $ | 175,256 |
(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 $2.6 million and $3.5 million for the three months ended March 31, 2024 and 2023, 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, 2024
(in thousands) |  | Maturity Date |  | Interest Rate |  | Outstanding Principal |  | Discount |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |
First Lien Term Loan Facility |  | January 2029 |  | 8.43% |  | $ | 1,727,000 |  |  | $ | (2,953) |  |  | $ | (20,515) |  |  | $ | 1,703,532 |
SBI bonds |  | January 2026 |  | 5.00% |  | 23,125 |  |  | — |  |  | — |  |  | 23,125 |
|  |  |  |  |  | $ | 1,750,125 |  |  | $ | (2,953) |  |  | $ | (20,515) |  |  | $ | 1,726,657 |
|  |  |  | At December 31, 2023
(in thousands) |  | Maturity Date |  | Interest Rate |  | Outstanding Principal |  | Discount |  | Deferred Debt Issuance Cost |  | Outstanding Borrowings, net
Long-term borrowings: |  |  |  |  |  |  |  |  |  |  |  |
First Lien Term Loan Facility |  | January 2029 |  | 8.46% |  | $ | 1,727,000 |  |  | $ | (3,107) |  |  | $ | (21,504) |  |  | $ | 1,702,389 |
SBI bonds |  | January 2026 |  | 5.00% |  | 24,816 |  |  | — |  |  | — |  |  | 24,816 |
|  |  |  |  |  | $ | 1,751,816 |  |  | $ | (3,107) |  |  | $ | (21,504) |  |  | $ | 1,727,205 |
Credit Agreement On January 13, 2022 (the “Credit Agreement Closing Date”), Virtu Financial, VFH Parent LLC, a Delaware limited liability company and a subsidiary of Virtu Financial (“VFH”), entered into a credit agreement with the lenders party thereto, JPMorgan Chase Bank, N.A. as administrative agent and JPMorgan Chase Bank, N.A., Goldman Sachs Bank USA, RBC Capital Markets, Barclays Bank plc, Jefferies Finance LLC, BMO Capital Markets Corp., and CIBC World Markets Corp., as joint lead arrangers and bookrunners (the “Credit Agreement”). The Credit Agreement provides (i) a senior secured first lien term loan in an aggregate principal amount of $1,800.0 million, drawn in its entirety on the Credit Agreement Closing Date, the proceeds of which were used by VFH to repay all amounts outstanding under the previous Credit Agreement, to pay fees and expenses in connection therewith, to fund share repurchases under the Company’s repurchase program, and for general corporate purposes, and (ii) a $250.0 million senior secured first lien revolving facility to VFH, with a $20.0 million letter of credit subfacility and a $20.0 million swingline subfacility. The term loan borrowings and revolver borrowings under the Credit Agreement 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 0.50%, (c) an adjusted term SOFR rate with an interest period of one month plus 1.00% and (d)(1) in the case of term loan borrowings, 1.50% and (2) in the case of revolver borrowings, 1.00%, plus, (x) in the case of term loan borrowings, 2.00% and (y) in the case of revolver borrowings, 1.50%, or (ii) the greater of (a) an adjusted term SOFR rate for the interest period in effect and (b) (1) in the case of term loan borrowings, 0.50% and (2) in the case of revolver borrowings, 0.00%, plus, (x) in the case of term loan borrowings, 3.00% and (y) in the case of revolver borrowings, 2.50%. 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 step-downs 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 test which may spring into effect as of the last day of a fiscal quarter if usage of the aggregate revolving commitments exceeds a specified level 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 domestic restricted subsidiaries and secured by substantially all of the assets of VFH and the guarantors, in each case, subject to certain exceptions. The Credit Agreement contains certain customary covenants and events of default, including relating to a change of control. If an event of default occurs and is continuing, the lenders under the Credit Agreement will be entitled to take various actions, including the acceleration of amounts outstanding under the Credit Agreement and all actions permitted to be taken by a secured creditor in respect of the collateral securing the obligations under the Credit Agreement. Under the Credit Agreement, the term loans will mature on January 13, 2029. The term loans amortize in annual installments equal to 1.0% of the original aggregate principal amount of the term loans and the Company repaid $18.0 million on January 13, 2023. On December 12, 2023, the Company made a voluntary prepayment of $55.0 million, and the payment is applied toward subsequent annual amortization installments. The revolving commitments will terminate on January 13, 2025. As of March 31, 2024, $1,727 million was outstanding under the term loans, and there were no amounts outstanding under the first lien revolving facility. In October 2019, the Company entered into a five-year $525 million floating-to-fixed interest rate swap agreement. In January 2020, the Company also entered into a five-year $1,000 million floating-to-fixed interest rate swap agreement. These two interest rate swaps met the criteria to be considered and were designated qualifying cash flow hedges under ASC 815 in the first quarter of 2020, and they effectively fixed interest payment obligations on $525.0 million and $1,000 million of principal under the Acquisition First Lien Term Loan Facility at rates of 4.3% and 4.4% through September 2024 and January 2025, respectively, based on the interest rates set forth in the Acquisition Credit Agreement. In April 2021, each of the swap agreements described above was novated to another counterparty and amended in connection with such novation. The amendments included certain changes to collateral posting obligations, and also had the effect of increasing the effective fixed interest payment obligations to rates of 4.5%, with respect to the earlier maturing swap arrangement, and 4.6% with respect to the later maturing swap arrangement. In January 2022, in order to align the swap agreements with the Credit Agreement, the Company amended each of the swap agreements to align the floating rate term of such swap agreements to SOFR. The effective fixed interest payment obligations remained at 4.5%, with respect to the earlier maturing swap arrangement, and 4.6% with respect to the later maturing swap arrangement. In December 2023, the Company terminated the two interest rate swap arrangements and received $55.8 million in proceeds from the counterparty. The Company therefore dedesignated those cash flow hedges under ASC 815, and the amounts in AOCI related to the terminated swaps are to be amortized through interest expense. The Company simultaneously entered into a two-year $1,525 million floating-to-fixed interest rate swap agreement with the same counterparty. The new interest rate swap met the criteria to be considered and was designated as a qualifying cash flow hedge under ASC 815 as of December 2023, and it effectively fixed interest payment obligations on $1,525 million of principal under the First Lien Term Loan Facility at rate of 7.5% through November 2025, based on the interest rates set forth in the 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 Japannext Co., Ltd. (as described in Note 9 “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. In December 2022, the maturity of the SBI Bonds was extended to 2026. The principal balance was ¥3.5 billion ($23.1 million) as of March 31, 2024 and ¥3.5 billion ($24.8 million) as of December 31, 2023. The Company had a gain of $1.7 million and $0.3 million during the three months ended March 31, 2024 and 2023, respectively, due to changes in foreign currency rates. As of March 31, 2024, aggregate future required minimum principal payments based on the terms of the long-term borrowings were as follows:
(in thousands) |  | March 31, 2024
Remainder of 2024 |  | $ | — |
2025 |  | $ | — |
2026 |  | 23,125 |
2027 |  | 17,000 |
2028 |  | 18,000 |
2029 |  | 1,692,000 |
Total principal of long-term borrowings |  | $ | 1,750,125 |

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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/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (h) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 2: http://www.xbrl.org/2003/role/disclosureRef -Topic 235 -SubTopic 10 -Name Accounting Standards Codification -Section S99 -Paragraph 1 -Subparagraph (SX 210.4-08(c)) -Publisher FASB -URI https://asc.fasb.org//1943274/2147480678/235-10-S99-1 Reference 3: http://fasb.org/us-gaap/role/ref/legacyRef -Topic 470 -Name Accounting Standards Codification -Publisher FASB -URI https://asc.fasb.org//470/tableOfContent Reference 4: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 5: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (g) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 6: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1B -Subparagraph (i) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1B Reference 7: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 8: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 9: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1C -Subparagraph (c) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1C Reference 10: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1E -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1E Reference 11: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (a) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 12: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (b) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I Reference 13: http://www.xbrl.org/2003/role/disclosureRef -Topic 470 -SubTopic 20 -Name Accounting Standards Codification -Section 50 -Paragraph 1I -Subparagraph (d) -Publisher FASB -URI https://asc.fasb.org//1943274/2147481139/470-20-50-1I + Details
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