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Term Loan and Revolving Credit Facility
 9 Months Ended
Sep. 30, 2014
Term Loan and Revolving Credit Facility [Abstract]  
Term Loan and Revolving Credit Facility
4. Term Loan and Revolving Credit Facility

 

On November 8, 2012, the Company entered into a Second Amended and Restated Revolving Credit and Term Loan Agreement (the “Amended Credit Facility”), providing for a $100.0 million revolving credit facility and $125.0 million term loan facility, with an option, subject to obtaining additional loan commitments and the satisfaction of certain conditions, to increase the commitments under the Credit Facility by up to $50.0 million in the future. Each of the revolving portions of the Amended Credit Facility, which includes a letter of credit subfacility of $50.0 million, and the term loan portion of the Amended Credit Facility matures on December 31, 2016, and amends and refinances the Company’s original Credit Facility. The term loan portion of the Amended Credit Facility also includes required quarterly amortization payments in the amount of $781,250 in the case of each payment made during calendar years 2013 and 2014, (0.625% of the aggregate original principal amount of the term loan facility), and $1,562,500 in the case of each payment made during calendar years 2015 and 2016, (1.25% of the aggregate original principal amount of the term loan facility). The Amended Credit Facility is guaranteed by the Company’s subsidiary and is secured by substantially all of the personal property and assets of the Company and the guarantor.

 

Borrowings under the Amended Credit Facility bear interest at LIBOR or a base rate plus a margin ranging from 2.00% to 2.50%, depending on the Company’s leverage ratio. The Company is party to an interest rate swap arrangement that fixes its interest rate on the entire term loan facility at an effective rate ranging from 2.85% to 3.35%, depending on the Company’s leverage ratio. In addition, an unused commitment fee ranging from 0.30% to 0.40%, depending on the Company’s leverage ratio, accrues on unused amounts under the revolving portion of the Amended Credit Facility. The Amended Credit Facility contains customary affirmative and negative covenants, representations, warranties, events of default and remedies upon default, including acceleration and rights to foreclose on the collateral securing the Amended Credit Facility. In addition, the Amended Credit Facility requires that the Company satisfy certain financial maintenance covenants, including:

 

● a total leverage ratio of not greater than 2.00:1.00;
     
● a coverage ratio of not less than 1.75:1.00; and
     
● a Department of Education financial composite score of not less than 1.5.

  

The Company was in compliance with all the terms of the Amended Credit Facility at September 30, 2014.

 

As of September 30, 2014, the Company had outstanding $119.5 million under the term loan facility and no balance outstanding under the revolving credit facility. During the three and nine months ended September 30, 2014, the Company paid cash interest of $1.1 million and $3.4 million, respectively, compared to $1.2 million and $3.4 million during the three and nine months ended September 30, 2013, respectively.

Debt and short-term borrowings consist of the following as of September 30, 2014 (in thousands):

 

Term loan   $ 119,532  
Revolving credit facility     —  
Total debt     119,532  
Less: Current portion of long-term debt     5,469  
Long-term debt   $ 114,063  

 

Aggregate debt maturities as of September 30, 2014 are as follows:

 

2014   $ 782  
2015     6,250  
2016     112,500  
    $ 119,532  

 

Interest Rate Swap

 

The Company is party to an interest rate swap on the outstanding balance of the Credit Facility in order to minimize the interest rate exposure on the balance of the term loan facility (the “Swap”). The Swap effectively fixes the variable interest rate on the associated term loan at a rate ranging from 2.85% to 3.35%, depending on the Company’s leverage ratio, rather than being subject to fluctuations in the LIBOR rate. The term of the Swap effectively matches the term of the underlying term loan facility. The Swap has been designated as a cash flow hedge and has been deemed effective in accordance with the Derivatives and Hedging Topic, ASC 815. The Company expects the Swap to continue to be deemed effective for the duration of the Swap. The fair value of the Swap is included in Other assets in the Company’s unaudited condensed consolidated balance sheets.