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DEBT | 3 Months Ended
--- | ---
Mar. 31, 2018
DEBT |
DEBT | 7 – DEBT Long-term debt, net consists of the following:
|  | March 31, |  | December 31, |
|  | 2018 |  | 2017 |
Principal amount |  | $ | 504,426 |  | $ | 519,083 |
PIK interest |  |  | 5,341 |  |  | 5,341 |
Less: Unamortized debt financing costs |  |  | (8,459) |  |  | (9,032) |
Less: Current portion |  |  | (24,308) |  |  | (24,497) |
Long-term debt, net |  | $ | 477,000 |  | $ | 490,895 |
|  | March 31, 2018 |  | December 31, 2017 |
|  |  |  | Unamortized |  |  |  | Unamortized |
|  |  |  | Debt Financing |  |  |  | Debt Financing |
|  | Principal |  | Cost |  | Principal |  | Cost |
$400 Million Credit Facility |  | $ | 388,166 |  | $ | 5,929 |  | $ | 399,600 |  | $ | 6,332 |
$98 Million Credit Facility |  |  | 91,397 |  |  | 1,247 |  |  | 93,939 |  |  | 1,370 |
2014 Term Loan Facilities |  |  | 24,863 |  |  | 1,283 |  |  | 25,544 |  |  | 1,330 |
PIK interest |  |  | 5,341 |  |  | — |  |  | 5,341 |  |  | — |
Total debt |  | $ | 509,767 |  | $ | 8,459 |  | $ | 524,424 |  | $ | 9,032 |
As of March 31, 2018 and December 31, 2017, $8,459 and $9,032 of deferred financing costs, respectively, were presented as a direct deduction within the outstanding debt balance in the Company’s Condensed Consolidated Balance Sheet. Amortization expense for deferred financing costs was $573 and $573 for the three months ended March 31, 2018 and 2017, respectively. This amortization expense is recorded as a component of Interest expense in the Condensed Consolidated Statements of Operations. $400 Million Credit Facility On November 10, 2016, the Company entered into a senior secured term loan facility, the $400 Million Credit Facility, in an aggregate principal amount of up to $400,000 with Nordea Bank Finland plc, New York Branch, Skandinaviska Enskilda Banken AB (publ), DVB Bank SE, ABN AMRO Capital USA LLC, Crédit Agricole Corporate and Investment Bank, Deutsche Bank AG Filiale Deutschlandgeschäft, Crédit Industriel et Commercial and BNP Paribas. On November 15, 2016, the proceeds under the $400 Million Credit Facility were used to refinance six of the Company’s prior credit facilities. The $400 Million Credit Facility is collateralized by 45 of the Company’s vessels and at December 31, 2016, required the Company to sell five remaining unencumbered vessels, which were sold during the year ended December 31, 2017. Refer to Note 4 — Vessel Acquisitions and Dispositions. On November 14, 2016, the Company borrowed the maximum available amount of $400,000. As of March 31, 2018, there was no availability under the $400 Million Credit Facility. Total debt repayments of $11,434 and $100 were made during the three months ended March 31, 2018 and 2017, respectively, under the $400 Million Credit Facility. As of March 31, 2018 and December 31, 2017, the total outstanding net debt balance, including PIK interest as defined below, was $387,578 and $398,609, respectively. The $400 Million Credit Facility has a final maturity date of November 15, 2021, and the principal borrowed under the facility will bear interest at the London Interbank Offered Rate (“LIBOR”) for an interest period of three months plus a margin of 3.75%. The Company has the option to pay 1.50% of such rate in-kind (“PIK interest”) through December 31, 2018, of which will be payable on the maturity date of the facility. The Company opted to make the PIK interest election through September 29, 2017 and as of March 31, 2018 and December 31, 2017, has recorded $5,341 of PIK interest which has been recorded in Long-term debt in the Condensed Consolidated Balance Sheet. The $400 Million Credit Facility originally had scheduled amortization payments of (i) $100 per quarter through December 31, 2018, (ii) $7,610 per quarter from March 31, 2019 through December 31, 2020, (iii) $18,571 per quarter from March 31, 2021 through September 30, 2021 and (iv) $282,605 upon final maturity on November 15, 2021, which did not include PIK interest. Pursuant to the credit facility agreement, upon the payment of any excess cash flow to the lenders (see below), the scheduled repayments shall be adjusted to reflect the reduction of future amortization amounts. There is no collateral maintenance testing for the $400 Million Credit Facility prior to June 30, 2018. Thereafter, there will be required collateral maintenance testing with a gradually increasing threshold calculated as the value of the collateral under the facility as a percentage of the loan outstanding as follows: 105% from June 30, 2018 to December 30, 2018, 115% from December 31, 2018 to December 30, 2020 and 135% thereafter. The $400 Million Credit Facility requires the Company to comply with a number of covenants substantially similar to those in the Company’s other credit facilities, including financial covenants related to debt to total book capitalization, minimum working capital, minimum liquidity, and dividends; collateral maintenance requirements (as described above); and other customary covenants. The Company is required to maintain a ratio of total indebtedness to total capitalization of not greater than 0.70 to 1.00 at all times. Minimum working capital as defined in the $400 Million Credit Facility is not to be less than $0 at all times. The $400 Million Credit Facility has minimum liquidity requirements at all times for all vessels in its fleet of (i) $250 per vessel to and including December 31, 2018, (ii) $400 per vessel from January 1, 2019 to and including December 31, 2019 and (iii) $700 per vessel from January 1, 2020 and thereafter. The Company is prohibited from paying dividends without lender consent through December 31, 2020. The Company may establish non-recourse subsidiaries to incur indebtedness or make investments, but it will be restricted from incurring indebtedness or making investments (other than through non-recourse subsidiaries). Excess cash from the collateralized vessels under the $400 Million Credit Facility are subject to a cash sweep. The cash flow sweep is 100% of excess cash flow through December 31, 2018, 75% through December 31, 2020 and the lesser of 50% of excess cash flow or an amount that would reflect a 15-year average vessel age repayment profile thereafter; provided no prepayment under the cash sweep is required from the first $10,000 in aggregate of the prepayments otherwise required under the cash sweep. During the three months ended March 31, 2018, the Company repaid $11,334 for the excess cash flow sweep based on the cash balance at December 31, 2017. As of March 31, 2018, the excess cash flow sweep was $4,094 and this amount will be due to the lender within 45 days of the end of the reporting period. As such, it had been included in the current portion of the outstanding debt for this facility. At March 31, 2018 and December 31, 2017, the Company has deposited $10,949 and $11,180, respectively, that has been reflected as noncurrent restricted cash which represents restricted pledged liquidity amounts pursuant to the $400 Million Credit Facility and $124 and $0, respectively, that has been reflected as current restricted cash. As of March 31, 2018, the Company believed it was in compliance with all of the financial covenants under the $400 Million Credit Facility. $98 Million Credit Facility On November 4, 2015, thirteen of the Company’s wholly-owned subsidiaries entered into a Facility Agreement, by and among such subsidiaries as borrowers (collectively, the “Borrowers”); Genco Holdings Limited, a newly formed direct subsidiary of Genco of which the Borrowers are direct subsidiaries (“Holdco”); certain funds managed or advised by Hayfin Capital Management, Breakwater Capital Ltd, or their nominee, as lenders; and Hayfin Services LLP, as agent and security agent (the “$98 Million Credit Facility”). The Borrowers borrowed the maximum available amount of $98,271 under the facility on November 10, 2015. As of March 31, 2018, there was no availability under the $98 Million Credit Facility. Total debt repayments of $2,542 and $0 were made during the three months ended March 31, 2018 and 2017, respectively, under the $98 Million Credit Facility. As of March 31, 2018 and December 31, 2017, the total outstanding net debt balance was $90,150 and $92,569, respectively. Borrowings under the facility are available for working capital purposes. The facility has a final maturity date of September 30, 2020, and the principal borrowed under the facility will bear interest at LIBOR for an interest period of three months plus a margin of 6.125% per annum. The facility has no fixed amortization payments for the first two years and fixed amortization payments of $2,500 per quarter thereafter. To the extent the value of the collateral under the facility is 182% or less of the loan amount outstanding, the Borrowers are to prepay the loan from earnings received from operation of the thirteen collateral vessels after deduction of the following amounts: costs, fees, expenses, interest, and fixed principal repayments under the facility; operating expenses relating to the thirteen vessels; and the Borrowers’ pro rata share of general and administrative expenses based on the number of vessels they own. The Facility Agreement requires the Borrowers and, in certain cases, the Company and Holdco to comply with a number of covenants substantially similar to those in the other credit facilities of Genco and its subsidiaries, including financial covenants related to maximum leverage, minimum consolidated net worth, minimum liquidity, and dividends; collateral maintenance requirements; and other customary covenants. The Company is prohibited from paying dividends under this facility until December 31, 2018. Following December 31, 2018, the amount of dividends the Company may pay is limited based on the amount of the repayment of at least $25 million of the loan under such facility, as well as the ratio of the value of vessels and certain other collateral pledged under such facility. The Facility Agreement includes usual and customary events of default and remedies for facilities of this nature. Borrowings under the facility are secured by first priority mortgage on the vessels owned by the Borrowers, namely the Genco Constantine, the Genco Augustus, the Genco London, the Genco Titus, the Genco Tiberius, the Genco Hadrian, the Genco Knight, the Genco Beauty, the Genco Vigour, the Genco Predator, the Genco Cavalier, the Genco Champion, and the Genco Charger, and related collateral. Pursuant to the Facility Agreement and a separate Guarantee executed by the Company, the Company and Holdco are acting as guarantors of the obligations of the Borrowers and each other under the Facility Agreement and its related documentation. On November 15, 2016, the Company entered into an Amending and Restating Agreement which amended and restated the credit agreements and the guarantee for the $98 Million Credit Facility (the “Restated $98 Million Credit Facility”). The Restated $98 Million Credit Facility provides for the following: reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility, except the minimum liquidity amount for the collateral vessels under this facility is $750 per vessel, which is reflected as restricted cash; netting of certain amounts against the measurements of the collateral maintenance covenant, which remains in place with a 140% value to loan threshold; a portion of amounts required to be maintained under the minimum liquidity covenant for this facility may, under certain circumstances, be used to prepay the facility to maintain compliance with the collateral maintenance covenant; elimination of the original maximum leverage ratio and minimum net worth covenants; and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to those provided for in the $400 Million Credit Facility. The minimum working capital and the total indebtedness to total capitalization are the same as the $400 Million Credit Facility. As of March 31, 2018 and December 31, 2017, the Company had deposited $5,323 and $7,234, respectively, that has been reflected as current restricted cash. As of March 31, 2018 and December 31, 2017, the Company had deposited $11,713 and $11,738, respectively, that has been reflected as noncurrent restricted cash. These amounts include certain restricted deposits associated with the Debt Service Account, Capex Account and minimum liquidity amount as defined in the $98 Million Credit Facility. As of March 31, 2018, the Company believed it was in compliance with all of the financial covenants under the Restated $98 Million Credit Facility. 2014 Term Loan Facilities On October 8, 2014, Baltic Trading and its wholly-owned subsidiaries, Baltic Hornet Limited and Baltic Wasp Limited, each entered into a loan agreement and related documentation for a credit facility in a principal amount of up to $16,800 with ABN AMRO Capital USA LLC and its affiliates (the “2014 Term Loan Facilities”) to partially finance the newbuilding Ultramax vessel that each subsidiary acquired, namely the Baltic Hornet and Baltic Wasp, respectively. Amounts borrowed under the 2014 Term Loan Facilities may not be reborrowed. The 2014 Term Loan Facilities have a ten-year term, and the facility amount is to be the lowest of 60% of the delivered cost per vessel, $16,800 per vessel, and 60% of the fair market value of each vessel at delivery. The 2014 Term Loan Facilities are insured by the China Export & Credit Insurance Corporation (Sinosure) in order to cover political and commercial risks for 95% of the outstanding principal plus interest, which was recorded in deferred financing fees. Borrowings under the 2014 Term Loan Facilities bear interest at the three or six-month LIBOR rate plus an applicable margin of 2.50% per annum. Borrowings are to be repaid in 20 equal consecutive semi-annual installments of 1/24 of the facility amount plus a balloon payment of 1/6 of the facility amount at final maturity. Principal repayments commenced six months after the actual delivery date for each respective vessel. Borrowings under the 2014 Term Loan Facilities are secured by liens on the vessels acquired with borrowings under these facilities, namely the Baltic Hornet and Baltic Wasp, and other related assets. The Company guarantees the obligations of the Baltic Hornet and Baltic Wasp under the 2014 Term Loan Facilities. As of March 31, 2018, the Company had utilized its maximum borrowing capacity, and there was no further availability. Total debt repayments of $681 were made during the three months ended March 31, 2018 and 2017 under the 2014 Term Loan Facilities. At March 31, 2018 and December 31, 2017, the total outstanding net debt balance was $23,580 and $24,214, respectively. On November 15, 2016, the Company entered into Supplemental Agreements with lenders under our 2014 Term Loan Facilities which, among other things, amended the Company’s collateral maintenance covenants under the 2014 Term Loan Facilities to provide that such covenants will not be tested through December 30, 2017 and the minimum collateral value to loan ratio will be 100% from December 31, 2017, 105% from June 30, 2018, 115% from December 31, 2018 and 135% from December 31, 2019. These Supplemental Agreements also provided for certain other amendments to the 2014 Term Loan Facilities, which included reductions in the minimum liquidity requirements consistent with the $400 Million Credit Facility and restrictions on incurring indebtedness, making investments (other than through non-recourse subsidiaries) or paying dividends, similar to the $400 Million Credit Facility. Additionally, the minimum working capital required is the same as under the $400 Million Credit Facility. Lastly, the maximum leverage requirement is equivalent to the debt to total capitalization requirement in the $400 Million Credit Facility. As of March 31, 2018, the Company believed it was in compliance with all of the financial covenants under the 2014 Term Loan Facilities. Interest rates The following table sets forth the effective interest rate associated with the interest expense for the Company’s debt facilities noted above, including the cost associated with unused commitment fees, if applicable. The following table also includes the range of interest rates on the debt, excluding the impact of unused commitment fees, if applicable:
|  | For the Three Months Ended |
|  | March 31, |
|  | 2018 |  |  | 2017 |
Effective Interest Rate |  | 5.83 | % |  | 5.01 | %
Range of Interest Rates (excluding unused commitment fees) |  | 3.83 % to 8.43 | % |  | 3.36 % to 7.27 | %

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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 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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