DEBT

3 Months Ended

Mar. 31, 2020

As of March 31, 2020 and December 31, 2019, long-term debt was as follows (amounts in millions):


	March 31, 2020		December 31, 2019
US Term loan due 2025	$	1,739.0	$	1,743.5
EMEA Term loan due 2025	951.5		828.8
7.875% Senior unsecured notes due 2024	575.0		575.0
Revolving line of credit due 2023	65.0		140.0
Other secured loans	2.1		4.3
Total debt obligations	3,332.6		3,291.6
Unamortized debt issuance costs	(26.6)		(28.0)
Unamortized original issuance discount, net	(48.0)		(40.8)
Carrying value of debt	3,258.0		3,222.8
Less current portion	(29.6)		(30.2)
Long-term debt less current portion	$	3,228.4	$	3,192.6

2018 Credit Agreement

On May 31, 2018, the Company entered into a credit agreement (the "2018 Credit Agreement") that provides for (1) a $1,770.0 million term loan B facility (the "US Term Loan Facility"), (2) a €750.0 million term loan B facility (the "EMEA Term Loan Facility"), and (3) a $200.0 million revolving credit facility (the "Revolving Line of Credit Facility") (which includes a $50.0 million letter of credit facility). The US Term Loan Facility was issued at an original issuance discount of $8.9 million and the EMEA Term Loan Facility was issued at an original issuance discount of €3.8 million. The Company is the borrower under the U.S. Term Loan Facility and the Revolving Line of Credit Facility. The Company's wholly-owned subsidiary GTT Communications B.V. is the borrower under the EMEA Term Loan Facility (the "EMEA Borrower").

The maturity date of the US Term Loan Facility and the EMEA Term Loan Facility (collectively the "Term Loan Facilities") is May 31, 2025 and the maturity date of the Revolving Line of Credit Facility is May 31, 2023. Each maturity date may be extended per the terms of the 2018 Credit Agreement.

The principal amounts of the US Term Loan Facility and EMEA Term Loan Facility are payable in equal quarterly installments of $4.425 million and €1.875 million, respectively, commencing on September 30, 2018 and continuing thereafter until the maturity date when the remaining balances of outstanding principal amount is payable in full.

The Company may prepay loans under the 2018 Credit Agreement at any time, subject to certain notice requirements, LIBOR breakage costs, and prepayment fees noted above.

At the Company’s election, the US Term Loan Facility may be made as either Base Rate Loans or Eurocurrency Loans. The EMEA Term Loan Facility will bear interest at the European Money Markets Institute EURIBOR plus the applicable margin. The applicable margin for the US Term Loan Facility is 1.75% for Base Rate Loans and 2.75% for Eurocurrency Loans, subject to a “LIBOR floor” of 0.00%. The applicable margin for the EMEA Term Loan Facility is 3.25%, subject to a “EURIBOR floor” of 0.00%. The applicable margin for revolving loans under the Revolving Line of Credit Facility is 1.75% for Base Rate Loans, 2.75% for Eurocurrency Loans denominated in U.S. Dollars and certain other approved currencies other than Euros, and 3.25% for revolving loans denominated in Euros.

The proceeds from the US Term Loan Facility and EMEA Term Loan Facility were used to finance the acquisition of Interoute Communications Holdings S.A., to repay amounts outstanding under the Company's prior term loan facility, and to pay costs associated with such transactions.

On June 5, 2019, the Company entered into an Incremental Revolving Credit Assumption Agreement ("Incremental Agreement") to the 2018 Credit Agreement. The Incremental Agreement establishes $50.0 million in new revolving credit commitments, bringing the total sum of revolving credit commitments under the 2018 Credit Agreement, as modified by the Incremental Agreement, to $250.0 million. The revolving credit commitments made pursuant to the Incremental Agreement have terms and conditions identical to the existing revolving credit commitments under the 2018 Credit Agreement.

On February 28, 2020, the Company entered into an amendment to the 2018 Credit Agreement (“Amendment No. 2”), which established incremental term loan commitments for $140 million of EMEA term loans (the “2020 EMEA Term Loan Facility”), bringing the total amounts of EMEA term loans outstanding under the 2018 Credit Agreement, as modified by Amendment No. 2, to €750 million in Euro-denominated loans and $140 million in US Dollar-denominated loans. The EMEA term loans under the 2020 EMEA Term Loan Facility were incurred with an original issue discount of $5.6 million.

The 2020 EMEA Term Loan Facility has terms substantially identical to the existing EMEA Term Loan Facility, except that: (1) each quarterly amortization payment on the 2020 EMEA Term Loan Facility will be $350,000; (2) the EMEA Term Loan Facility has a prepayment penalty of 2.0% for certain mandatory and voluntary prepayments occurring on or prior to the one year anniversary of the effective date of the EMEA Term Loan Facility and 1.0% for certain mandatory and voluntary prepayments occurring following the one year anniversary of the effective date of the EMEA Term Loan Facility and until the second year anniversary thereof; (3) Amendment No. 2 added, for the benefit of the lenders under the 2020 EMEA Term Loan Facility, the same covenant restrictions contained in Amendment No. 1, except that (a) the amount of secured debt that can be incurred on a pari passu basis with the 2020 EMEA Term Loan Facility and certain types of debt incurred by non-credit parties is limited to $50 million in the aggregate and (b) certain excess asset sale proceeds will be required to prepay outstanding EMEA term loans or reinvest in long-term assets useful in the business within 30 days following receipt of such proceeds, which covenant restrictions will remain in place for so long as the existing Revolving Line of Credit Facility and the 2020 EMEA Term Loan Facility remain in effect; and (4) the applicable margin for the 2020 EMEA Term Loan Facility is (a) 3.25% for Base Rate Loans and 4.25% for Eurocurrency Loans for the first two years following the effective date of the 2020 EMEA Term Loan Facility and (b) 3.75% for Base Rate Loans and 4.75% for Eurocurrency Loans on and following the second anniversary of the effective date of the 2020 EMEA Term Loan Facility.

The proceeds of the 2020 EMEA Term Loan Facility were used to repay amounts outstanding under the Revolving Line of Credit Facility and for general corporate purposes.

The unused and available amount of the Revolving Line of Credit Facility at March 31, 2020 was as follows (amounts in millions):


Committed capacity	$	250.0
Borrowings outstanding	(65.0)
Letters of credit issued	(10.9)
Unused and available	$	174.1

The obligations of the Company under the 2018 Credit Agreement are secured by the substantial majority of the tangible and intangible assets of the Company. The obligations of the Company under the U.S. Term Loan Facility and the Revolving Line of Credit Facility are guaranteed by certain of its domestic subsidiaries, but not by any of the Company’s foreign subsidiaries. The obligations of the EMEA Borrower under the EMEA Term Loan Facility are guaranteed by the Company and certain of its domestic and foreign subsidiaries. None of the foreign subsidiary guarantors of the EMEA Term Loan Facility provide cross-guarantees of the guarantees of the EMEA Term Loan Facility provided by the Company and its domestic subsidiaries.

The 2018 Credit Agreement does not contain a financial covenant for the US Term Loan Facility or the EMEA Term Loan Facility, but it does include a maximum Consolidated Net Secured Leverage Ratio applicable to the Revolving Line of Credit Facility in the event that utilization exceeds 30% of the revolving loan facility commitment. At March 31, 2020, the Company's utilization (as defined) of the Revolving Line of Credit Facility commitment was approximately 26%. On August 8, 2019, the Company entered into Amendment No. 1 to the 2018 Credit Agreement, which amends the Consolidated Net Secured Leverage Ratio applicable to the Revolving Line of Credit Facility for each fiscal quarter ending September 30, 2019 through December 31, 2020. If triggered, the covenant, as amended, requires the Company to maintain a Consolidated Net Secured Leverage Ratio, on a Pro Forma Basis, below the maximum ratio specified as follows:


Fiscal Quarter Ending						Maximum Ratio
March 31, 2020						6.50:1
June 30, 2020						6.50:1
September 30, 2020						6.25:1
December 31, 2020						6.25:1
March 31, 2021						5.50:1
June 30, 2021						5.00:1
September 30, 2021						5.00:1
December 31, 2021						4.50:1
March 31, 2022						4.50:1
June 30, 2022 and thereafter						4.25:1

While the financial covenant was not required to be measured as a result of the utilization level of the Revolving Line of Credit Facility as of March 31, 2020, the Company's Consolidated Net Secured Leverage Ratio, as defined in the 2018 Credit Agreement, was approximately 6.53:1.

In addition, Amendment No. 1 to the 2018 Credit Agreement added certain restrictions, which remain in place from the effective date of the Amendment No. 1 until the delivery of the compliance certificate for the quarter ending March 31, 2021, demonstrating compliance with the Consolidated Net Secured Leverage Ratio for that quarter, including without limitation the following: the Company and its restricted subsidiaries (as defined in the 2018 Credit Agreement) may not make certain dividends, distributions and other restricted payments (as defined in the 2018 Credit Agreement), including that the Company may not pay dividends; the Company and its restricted subsidiaries may not designate any subsidiary an “Unrestricted Subsidiary” (which would effectively remove such subsidiary from the restrictions of the 2018 Credit Agreement); the Company and its restricted subsidiaries may not make “permitted acquisitions” (as defined in the 2018 Credit Agreement) or certain other investments, unless the Company and its restricted subsidiaries have liquidity (i.e., unrestricted cash and cash equivalents and availability under the revolving credit facility under the 2018 Credit Agreement) of at least $250 million (other than the acquisition of KPN Eurorings B.V., a private limited liability company (besloten vennootschap met beperkte aansprakelijkheid) incorporated under the laws of the Netherlands with respect to which this liquidity requirement is not applicable); and the amount of incremental borrowings under the 2018 Credit Agreement that the Company and its subsidiaries may request when the Consolidated Net Secured Leverage Ratio is above 4.40 to 1.00 the Company and its subsidiaries was reduced to $300 million minus amounts previously requested (which amount is $50 million requested under the Incremental Agreement described above).

Interest Rate Swaps

In April and May 2018, the Company entered into the following interest rate swap arrangements to partially mitigate the variability of cash flows due to changes in the Eurodollar rate, specifically related to interest payments on our term loans under the 2018 Credit Agreement:


Trade date	April 6, 2018			May 17, 2018			May 17, 2018			May 17, 2018
Notional amount (in millions)	$	500.0		$	200.0		$	300.0		€	317.0
Term (years)	5			7			3			7
Effective date	4/30/2018			6/29/2018			6/29/2018			6/29/2018
Termination date	4/30/2023			5/31/2025			6/30/2021			5/31/2025
Fixed rate	2.6430		%	3.0370		%	2.8235		%	0.8900		%
Floating rate	1-month LIBOR			1-month LIBOR			1-month LIBOR			1-month EURIBOR

The interest rate swaps do not qualify for hedge accounting.

The fair value of the interest rate swaps at March 31, 2020 and December 31, 2019 was as follows (in millions):


					Fair Value
					March 31, 2020						December 31, 2019
Derivative Instrument	Aggregate Notional Amount		Effective Date	Maturity Date	Asset Derivatives		Liability Derivatives		Asset Derivatives		Liability Derivatives
Interest rate swap	$	500.0	4/30/2018	4/30/2023	$	—	$	(36.1)	$	—	$	(18.2)
Interest rate swap	$	200.0	6/29/2018	5/31/2025	—		(27.1)		—		(15.3)
Interest rate swap	$	300.0	6/29/2018	6/30/2021	—		(9.5)		—		(5.8)
Interest rate swap	€	317.0	6/29/2018	5/31/2025	—		(14.0)		—		(14.2)
					$	—	$	(86.7)	$	—	$	(53.5)

The Company records the fair value of interest rate swaps in its condensed consolidated balance sheets within prepaid expenses and other current assets when in an asset position and within accrued expenses and other current liabilities when in a liability position. Due to the change in fair value of its interest rate swaps, the Company recognized a loss of $33.5 million and $15.3 million in other expense, net for the three months ended March 31, 2020 and 2019, respectively.

7.875% Senior Unsecured Notes

During 2016 and 2017, the Company completed three private offerings for $575.0 million aggregate principal amount of its 7.875% senior unsecured notes due in 2024 (collectively the “7.875% Senior Unsecured Notes”). Each offering was treated as a single series of debt securities. The 7.875% Senior Unsecured Notes have identical terms other than the issuance date and offering price. The 7.875% Senior Unsecured Notes were issued at a combined premium of $16.5 million.

The 7.875% Senior Unsecured Notes are guaranteed by the Company’s domestic subsidiaries that guarantee the Company’s obligations under the U.S. Term Loan Facility and the Revolving Line of Credit Facility, but not by any of the Company’s foreign subsidiaries. We are in compliance with the subsidiary guarantee requirements for the 7.875% Senior Unsecured Notes.

Other Secured Loans

In connection with the Interoute acquisition in May 2018, the Company acquired other loans secured by certain network assets. The balance of other secured loans at March 31, 2020 and December 31, 2019 was $2.1 million and $4.3 million, respectively.

Effective Interest Rate

The effective interest rate on the Company's long-term debt at March 31, 2020 and December 31, 2019 was 5.2% and 5.2%, respectively. The effective interest rate considers the impact of the interest rate swaps.

Long-term Debt Contractual Maturities

The aggregate contractual maturities of long-term debt (excluding unamortized debt issuance costs and unamortized original issuance discounts and premiums) were as follows as of March 31, 2020 (amounts in millions):


	Total Debt
2020 remaining	$	22.9
2021	27.3
2022	27.5
2023	92.5
2024	602.4
2025 and beyond	2,560.0
	$	3,332.6

Debt Issuance Costs and Original Issuance Discounts and Premiums

The following table summarizes the debt issuance costs activity for the three months ended March 31, 2020 (amounts in millions):


	US Term Loan		EMEA Term Loan		7.875% Senior Unsecured Notes		Revolving Line of Credit		Total
Balance, December 31, 2019	$	(9.9)	$	(2.7)	$	(12.3)	$	(3.1)	$	(28.0)
Debt issuance costs incurred	—		(2.3)		—		—		(2.3)
Amortization	0.4		0.3		0.5		0.2		1.4
Loss on debt extinguishment	—		2.3		—		—		2.3
Balance, March 31, 2020	$	(9.5)	$	(2.4)	$	(11.8)	$	(2.9)	$	(26.6)

Debt issuance costs are presented in the condensed consolidated balance sheets as a reduction to long-term debt. Interest expense associated with the amortization of debt issuance costs was $1.4 million and $1.2 million for the three months ended March 31, 2020 and 2019, respectively.

The following table summarizes the original issuance (discount) and premium activity for the three months ended March 31, 2020 (amounts in millions):


	US Term Loan		EMEA Term Loan		7.875% Senior Unsecured Notes		Total
Balance, December 31, 2019	$	(34.2)	$	(18.7)	$	12.1	$	(40.8)
New Original Issuance Discount	—		(5.6)		—		(5.6)
Fees paid to lenders	—		(3.4)		—		(3.4)
Amortization	1.4		0.9		(0.5)		1.8


Balance, March 31, 2020	$	(32.8)	$	(26.8)	$	11.6	$	(48.0)

Original issuance discounts and premiums are presented in the condensed consolidated balance sheets as a reduction to long-term debt. Amortization of original issuance discounts and premiums was $1.8 million and $1.9 million for the three months ended March 31, 2020 and 2019, respectively.