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Bank Syndicated Financing
12 Months Ended
Dec. 31, 2011
Bank Syndicated Financing

Note 16    Bank Syndicated Financing

The following is a summary of bank syndicated financing and the weighted average interest rate on borrowings as of December 31:

 

     Outstanding Balance      Weighted Average
Interest Rate
 
(Dollars in thousands)    2011      2010          2011             2010      

Term loan

   $ 90,000       $ 100,000         3.05     5.00

Revolving credit facility

     25,000         25,000         3.05     5.00
  

 

 

    

 

 

      

Total bank syndicated financing

   $ 115,000       $ 125,000        
  

 

 

    

 

 

      

 

On December 29, 2010, the Company entered into a three-year bank syndicated credit agreement (“Credit Agreement”) comprised of a $100 million amortizing term loan and a $50 million revolving credit facility. SunTrust Bank is the administrative agent (“Agent”) for the lenders. Pursuant to the Credit Agreement, the term loan and revolving credit facility mature on December 29, 2013. The term loan is payable in equal quarterly installments in annual amounts as set forth below:

 

(Dollars in thousands)       

Due in 2012

   $ 25,000   

Due in 2013

     65,000   
  

 

 

 
   $ 90,000   
  

 

 

 

The interest rate for borrowing under the Credit Agreement is, at the option of the Company, equal to LIBOR or a base rate, plus an applicable margin, adjustable and payable quarterly. The base rate is defined as the highest of the Agent’s prime lending rate, the Federal Funds Rate plus 0.50 percent or one-month LIBOR plus 1.00 percent. The applicable margin varies from 1.50 percent to 3.00 percent and is based on the Company’s leverage ratio. The aggregate debt issuance costs are recognized as additional interest expense over the three-year life under the effective yield interest expense method. Based on our current leverage ratio and aggregate debt issuance costs, the Company expects the annual all in rate to be approximately 4.23 percent. In addition, the Company also pays a nonrefundable commitment fee of 0.50 percent on the unused portion of the revolving credit facility on a quarterly basis.

The Company’s Credit Agreement is recorded at amortized cost. As of December 31, 2011, the carrying value of the Credit Agreement approximates fair value.

The Credit Agreement includes customary events of default, including failure to pay principal when due or failure to pay interest within three business days of when due, failure to comply with the covenants in the Credit Agreement and related documents, failure to pay or another event of default under other material indebtedness in an amount exceeding $5 million, bankruptcy or insolvency of the Company or any of its subsidiaries, a change in control of the Company or a failure of Piper Jaffray to extend, renew or refinance its existing $250 million committed revolving secured credit facility on substantially the same terms as the existing committed facility. If there is any event of default under the Credit Agreement, the Agent may declare the entire principal and any accrued interest on the loans under the Credit Agreement to be due and payable and exercise other customary remedies.

The Credit Agreement includes covenants that, among other things, limit the Company’s leverage ratio, require maintenance of certain levels of cash and regulatory net capital, require the Company’s asset management segment to achieve minimum earnings before interest, taxes, depreciation and amortization, and impose certain limitations on the Company’s ability to make acquisitions and to repurchase or declare dividends on its capital stock. The Credit Agreement limits annual share repurchases to the amount of new equity granted during that fiscal year. With respect to the net capital covenant, the Company’s U.S. broker dealer subsidiary is required to maintain minimum net capital of $160 million. At December 31, 2011, the Company was in compliance with all covenants.