Debt

3 Months Ended

Mar. 31, 2021

The following table presents White Mountains’s debt outstanding as of March 31, 2021 and December 31, 2020:


Millions	March 31, 2021		Effective Rate	(1)	December 31, 2020		Effective Rate	(1)

Ark Alesco Notes, carrying value	$	30.0			$	—
Ark Dekania Note, carrying value	14.1				—
Ark Subordinated Notes, carrying value	44.1		4.6%		—
NSM Bank Facility	277.3		7.6%	(2)	277.4		7.5%	(2)
Unamortized issuance cost	(5.8)				(6.1)
NSM Bank Facility, carrying value	271.5				271.3
Other NSM debt, carrying value	1.2		2.3%		1.3		2.5%
Kudu Credit Facility	102.0		5.2%		—
Unamortized issuance cost	(6.1)				—
Kudu Credit Facility, carrying value	95.9				—
Kudu Bank Facility	—				89.2		8.3%
Unamortized issuance cost	—				(2.9)
Kudu Bank Facility, carrying value	—				86.3



Other Operations debt	17.5		7.6%		18.0		7.4%
Unamortized issuance cost	(.5)				(.5)
Other Operations, carrying value	17.0				17.5
Total debt	$	429.7			$	376.4

(1) Effective rate includes the effect of the amortization of debt issuance costs.

(2) NSM’s effective rate excludes the effect of the interest rate swap on the hedged portion of the debt. The weighted average interest rate for the quarter ended March 31, 2021 and December 31, 2020, excluding the effect of amortization of debt issuance costs, was 7.1% and 7.0%. The weighted average interest rate for the quarter ended March 31, 2021 and December 31, 2020 on the total NSM Bank Facility including both the effect of the amortization of debt issuance costs and the effect of the interest rate swap was 8.5% and 8.4%.

Ark Subordinated Notes

In March 2007, Ark issued $30.0 million face value of floating rate unsecured junior subordinated deferrable interest notes to Alesco Preferred Funding XII Ltd., Alesco Preferred Funding XIII Ltd. and Alesco Preferred Funding XIV Ltd (the “Ark Alesco Notes”) and a €12.0 million floating rate subordinated note to Dekania Europe CDO II plc (the “Ark Dekania Note”) (together, the “Ark Subordinated Notes”). The Alesco Notes, which mature in June 2037, accrue interest at a floating rate equal to the three-month U.S. LIBOR plus 4.6%. The Ark Dekania Note, which matures in June 2027, accrues interest at a floating rate equal to the three-month EURIBOR plus 4.6%. As of March 31, 2021, the Ark Alesco Notes had an outstanding balance of $30.0 million and the Ark Dekania Note had an outstanding balance of €12.0 million (approximately $14.1 million based upon the foreign exchange spot rate as of March 31, 2021).

Ark Stand By Letter of Credit Facility

Ark has a secured stand by letter of credit facility (the “Ark LOC Facility”) with three lenders, Lloyds Bank plc, National Westminster Bank plc and ING Bank N.V, London Branch to provide capital support for the Syndicates. As of March 31, 2021, the utilized level of the facility was $45.0 million, with the ability to increase to $150.0 million. The Ark LOC Facility has a termination date of December 31, 2025. During the three months ended March 31, 2021, Ark did not borrow or make any repayments under the Ark LOC Facility.

The Ark LOC Facility, which provides funds at Lloyd’s, is secured by all property of the loan parties and contains various affirmative, negative and financial covenants that White Mountains considers to be customary for such borrowings, including a minimum tangible net worth covenant.

NSM Bank Facility

On April 7, 2020, NSM amended its secured credit facility (the “NSM Bank Facility”) with Ares Capital Corporation in connection with the acquisition of Kingsbridge. Under the amendment, the total commitment increased from $234.0 million, comprised of term loans of $224.0 million and a revolving credit loan of $10.0 million, to $291.4 million, comprised of term loans of $276.4 million, including £42.5 million (approximately $52.4 million based upon the foreign exchange spot rate as of the date of the transaction) in a GBP term loan, and a revolving credit loan commitment of $15.0 million. The term loans under the NSM Bank Facility mature on May 11, 2026, and the revolving loan matures on November 11, 2025.

Under GAAP, if the terms of a debt instrument are amended, unless there is greater than 10% change in the expected discounted future cash flows of such instrument, the instrument’s carrying value does not change. White Mountains has determined that the impact of the changes to the terms of the NSM Bank Facility on the expected discounted future cash flows was less than 10%.

Interest on the NSM Bank Facility accrues at a floating interest rate equal to the three-month LIBOR plus an applicable margin. In connection with the amendment, the reference rates for USD denominated borrowings increased. The USD-LIBOR rate floor increased to 1.25% and the margin over USD-LIBOR increased from a range of 4.25% to 4.75% to a range of 5.50% to 6.00%. For GBP denominated borrowings, the GBP-LIBOR rate floor is 1.25% and the margin over GBP-LIBOR ranges from 6.00% to 6.50%. The margins over the reference interest rates vary within the range depending on the consolidated total leverage ratio of NSM.

The following table presents the change in debt under the NSM Bank Facility for the three months ended March 31, 2021 and 2020:


NSM Bank Facility	Three Months Ended
	March 31,
Millions		2021		2020
Beginning balance		$	277.4	$	221.3
Term loans
Borrowings		—		—
Repayments		(.7)		(.6)
Foreign currency translation		.6		—
Revolving credit loan
Borrowings		—		—
Repayments		—		—
Ending balance		$	277.3	$	220.7

As of March 31, 2021, the term loans had an outstanding balance of $277.3 million, including £42.5 million (approximately $58.2 million based upon the foreign exchange spot rate as of March 31, 2021) in a GBP term loan, and the revolving credit loan was undrawn.

On June 15, 2018, NSM entered into an interest rate swap agreement to hedge its exposure to interest rate risk on $151.0 million of its USD denominated variable rate term loans.

As of March 31, 2021, $147.2 million of the outstanding term loans were hedged by the swap and $130.1 million of the outstanding term loans were unhedged. The following table presents the NSM weighted average interest rate for the three months ended March 31, 2021 and 2020:


NSM Weighted Average Interest Rate	Three Months ended March 31,
	2021						2020
Millions	Weighted Average		Interest Expense (1)		Weighted Average Interest rate		Weighted Average		Interest Expense (1)		Weighted Average Interest rate
Term loan - hedged	$	147.6	$	3.4	9.2	%	$	148.4	$	3.0	8.1	%
Term loan - unhedged	129.8		2.5		7.7	%	72.6		1.2		6.6	%
Total NSM Facility	$	277.4	$	5.9	8.5	%	$	221.0	$	4.2	7.6	%

(1) Interest expense includes the amortization of debt issuance costs and the effect of the interest rate swap and excludes interest expense related to the Other NSM Debt.

The NSM Bank Facility is secured by all property of the loan parties and contains various affirmative, negative and financial covenants that White Mountains considers to be customary for such borrowings, including a maximum consolidated total leverage ratio covenant.

Other NSM Debt

NSM also has a secured term loan related to its U.K. vertical. As of March 31, 2021, the secured term loan had an outstanding balance of $1.4 million and a maturity date of December 31, 2022.

Kudu Credit Facility and Kudu Bank Facility

On December 23, 2019, Kudu entered into a secured credit facility with Monroe Capital Management Advisors, LLC (the “Kudu Bank Facility”). On March 23, 2021, Kudu replaced the Kudu Bank Facility and entered into a secured revolving credit facility (the “Kudu Credit Facility”) with Massachusetts Mutual Life Insurance Company to fund new investments and related transaction expenses. The maximum borrowing capacity of the Kudu Credit Facility is $300.0 million, which includes the initial advanced amount of $102.0 million. The Kudu Credit Facility matures on March 23, 2036. During the three months ended March 31, 2021, Kudu borrowed $3.0 million and repaid the outstanding Kudu Bank Facility balance of $92.2 million. As of March 31, 2021, the Kudu Credit Facility had an undrawn balance of $198.0 million. Kudu may borrow undrawn balances within the initial three year availability period, subject to customary terms and conditions, to the extent the amount borrowed under the Kudu Credit Facility does not exceed 35% of the borrowing base, which is comprised of Kudu’s qualifying participation contracts (the “LTV percentage”). When considering White Mountains’s remaining equity commitment to Kudu, the available undrawn balance was $60.8 million as of March 31, 2021.

Interest on the Kudu Credit Facility accrues at a floating interest rate equal to the greater of the three-month USD-LIBOR and 0.25%, plus in each case, the applicable spread of 4.30%. The Kudu Credit Facility requires Kudu to maintain an interest reserve account, which is included in restricted cash. As of March 31, 2021, the interest reserve account is $3.9 million. The Kudu Credit Facility requires Kudu to maintain an LTV percentage of less than 50% in years 0-3, 40% in years 4-6, 25% in years 7-8, 15% in years 9-10, and 0% thereafter. As of March 31, 2021, Kudu has a 29.5% LTV.

The Kudu Credit Facility is secured by all property of the loan parties and contains various affirmative and negative covenants that White Mountains considers to be customary for such borrowings.

Other Operations Debt

As of March 31, 2021, debt in White Mountains’s Other Operations segment consisted of two secured credit facilities. The first credit facility has a maximum borrowing capacity of $16.3 million, which is comprised of a term loan of $11.3 million, a delayed-draw term loan of $3.0 million and a revolving credit loan commitment of $2.0 million, all with a maturity date of March 12, 2024. During the three months ended March 31, 2021, White Mountains’s Other Operations segment borrowed $0.3 million on the revolving credit loan and made repayments of $0.6 million on the term loans, under the first credit facility. As of March 31, 2021, the first credit facility had an outstanding balance of $8.8 million. The second credit facility has a maximum borrowing capacity of $15.0 million, which is comprised of a term loan of $9.0 million, a delayed-draw term loan of $4.0 million and a revolving credit loan commitment of $2.0 million, all with a maturity date of July 2, 2025. During the three months ended March 31, 2021, White Mountains’s Other Operations segment had no borrowings and made repayments of $0.2 million on the term loans under the second credit facility. As of March 31, 2021, the second credit facility had an outstanding balance of $8.7 million.

Compliance

At March 31, 2021, White Mountains was in compliance in all material respects with the covenants under all of its debt instruments.