LONG-TERM DEBT

12 Months Ended

Dec. 31, 2012

LONG-TERM DEBT

LONG-TERM DEBT

13. LONG-TERM DEBT

Long-term debt consists of the following as of December 31:

(in thousands)	2012			2011
Senior Secured Term Loan	$	200,000		$	—
Less: original issue discount	(1,973		)	—
Net long-term debt	198,027			—
Less: current portion	(2,000		)	—
Long-term debt, less current portion	$	196,027		$	—

On November 27, 2012, we entered into a seven-year senior secured term loan facility agreement (the “Credit Agreement”) with Bank of America, N.A. as administrative agent and certain lenders, pursuant to which we borrowed $200.0 million (the “Senior Secured Term Loan”). The Senior Secured Term Loan was issued with a 1.0% original issue discount ($2.0 million), resulting in net proceeds of $198.0 million (the “Proceeds”), with certain wholly-owned subsidiaries acting as guarantors (collectively, the “Guarantors”).

The Proceeds were used to capitalize Residential and AAMC (as described in Note 3), and also to pay certain fees, commissions and expenses in connection with the Credit Agreement. The Proceeds may also be used for general corporate purposes, including acquisitions and investments permitted under the Credit Agreement.

Payments under the Credit Agreement are guaranteed by the Guarantors and are secured by a pledge of all equity interests of certain subsidiaries, as well as a lien on substantially all of the assets of Altisource Solutions S.à r.l., a wholly-owned subsidiary of Altisource, and the Guarantors, subject to certain exceptions.

The Senior Secured Term Loan bears interest at rates based upon, at our option, the Adjusted Eurodollar Rate or the Base Rate (each as defined in the Credit Agreement).  Eurodollar Rate loans will bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Adjusted Eurodollar Rate for the applicable interest period and (y) 1.25% plus (ii) a 4.50% margin.  Base Rate loans will bear interest at a rate per annum equal to the sum of (i) the greater of (x) the Base Rate and (y) 2.25% plus (ii) a 3.50% margin. The interest rate as of December 31, 2012 was 5.75%.

The Senior Secured Term Loan must be repaid in equal consecutive quarterly principal installments, commencing on March 29, 2013, equal to 0.25% of the initial principal amount of such loans, with final payment of all amounts outstanding, plus accrued and unpaid interest, becoming due on November 27, 2019.

The covenants restrict or limit, among other things, our ability to: create liens and encumbrances; incur additional indebtedness; make asset sales, transfers or dispositions; change lines of business; amend material debt agreements or other material contracts; engage in certain transactions with affiliates; enter into sale/leaseback transactions; grant negative pledges or agree to such other restrictions relating to subsidiary dividends and distributions; make changes to its fiscal year; and engage in mergers and consolidations.

In addition to the scheduled principal payments, the Senior Secured Term Loan is (with certain exceptions) subject to mandatory prepayment upon issuances of debt, casualty and condemnation events, and sales of assets, as well as from a percentage of excess cash flow (as defined in the Credit Agreement) if the leverage ratio (as defined in the Credit Agreement) is greater than 2.5x. No mandatory prepayments were owed for the year ended December 31, 2012. We are permitted to make voluntary prepayments without penalty after November 27, 2013. If prepayments are made prior to November 27, 2013, 1.00% of the principal amount of the prepaid term loans will be incurred.

The Credit Agreement contains certain events of default, including (i) failure to pay principal when due or interest or any other amount owing on any other obligation under the Credit Agreement within 5 days of becoming due, (ii) material incorrectness of representations and warranties when made, (iii) breach of covenants, (iv) failure to pay principal or interest on any other debt that equals or exceeds $40 million when due, (v) default on any other debt that equals or exceeds $40 million that causes, or gives the holder or holders of such debt the ability to cause, an acceleration of such debt, (vi) occurrence of a Change in Control (as defined in the Credit Agreement), (vii) bankruptcy and insolvency events (as defined in the Credit Agreement), (viii) entry by a court of one or more judgments against us (as defined in the Credit Agreement) in an amount in excess of $40 million that remain unbonded, undischarged  or unstayed for a certain number of days after the entry thereof, (ix) the occurrence of certain ERISA events and (x) the failure of certain Loan Documents (as defined in the Credit Agreement) to be in full force and effect.  If any event of default occurs and is not cured within applicable grace periods set forth in the Credit Agreement or waived, all loans and other obligations could become due and immediately payable and the facility could be terminated.

Legal fees and other direct expenses relating to the Senior Secured Term Loan were capitalized.  At December 31, 2012, total debt issuance costs were $4.3 million, net of $0.1 million of accumulated amortization and are included in other assets in the accompanying consolidated balance sheet.

Interest expense on the Senior Secured Loan, including amortization of debt issuance costs and the debt discount, totaled $1.2 million in 2012 (no comparative amounts in 2011 or 2010).

Maturities of our long-term debt are as follows:

(in thousands)
2013	$	2,000
2014	2,000
2015	2,000
2016	2,000
2017	2,000
Thereafter	190,000
	200,000
Less: current portion	(2,000		)
	$	198,000