Debt and Short-Term Borrowings

Total debt at June 30, 2017 and December 31, 2016 follows:



(Dollar amounts in thousands)	June 30, 2017		December 31, 2016
Senior Secured Credit Facility (2018 Term A) due on April 17, 2018 paying interest at a variable interest rate (London InterBank Offered Rate (“LIBOR”) plus applicable margin(1)(3))	$	27,894	$	28,721
Senior Secured Credit Facility (2020 Term A) due on January 17, 2020 paying interest at a variable interest rate (LIBOR plus applicable margin(3)(4))	206,657		212,661
Senior Secured Credit Facility (Term B) due on April 17, 2020 paying interest at a variable interest rate (LIBOR plus applicable margin(2)(3))	377,218		378,074
Senior Secured Revolving Credit Facility(6)	48,000		28,000
Note Payable due on October 1, 2017(3)	772		1,524
Note Payable due on July 31, 2017(3)	372		357
Note Payable due on August 31, 2019(5)	740		890
Note Payable due on April 30, 2021(3)	476		532
Total debt	$	662,129	$	650,759


(1)	Applicable margin of 2.25% at June 30, 2017 and December 31, 2016.


(2)	Subject to a minimum rate (“LIBOR floor”) of 0.75% plus applicable margin of 2.50% at June 30, 2017 and December 31, 2016.


(3)	Net of unaccreted discount and unamortized debt issue costs, as applicable.


(4)	Applicable margin of 2.50% at June 30, 2017 and December 31, 2016.


(5)	Fixed interest rate of 7.50%.


(6)	Applicable margin of 2.50% at June 30, 2017 and December 31, 2016.

Senior Secured Credit Facilities

On April 17, 2013, EVERTEC Group entered into a credit agreement (the “2013 Credit Agreement”) governing the senior secured credit facilities, consisting of a $300.0 million term loan A facility (the “Term A Loan”), a $400.0 million term loan B facility (the “Term B Loan”, together with the Term A Loan, the “Senior Secured term loans”) and a $100.0 million revolving credit facility (the "Revolving Facility"). During 2016, the Company entered into two separate amendments to the 2013 Credit Agreement. In the second quarter of 2016, EVERTEC Group, together with certain other direct and indirect subsidiaries of the Company, entered into a second amendment and waiver to the outstanding 2013 Credit Agreement (the “Second Amendment”). In the fourth quarter of 2016, EVERTEC Group, together with certain other direct and indirect subsidiaries of the Company, entered into a third amendment (the “Third Amendment”) to the 2013 Credit Agreement. The Third Amendment extends the maturity of (a) approximately $219 million of EVERTEC Group’s existing approximately $250 million of Term A loan facility to January 17, 2020 (the “2020 Term A Loan”) and (b) $65 million of EVERTEC Group’s existing $100 million of Revolving Facility to January 17, 2020. The remaining approximately $30 million of Term A loan (the “2018 Term A Loan”) and the $35 million of Revolving Facility that were not extended will remain in place and mature as originally scheduled on April 17, 2018. The Term B loan facility will remain in place and mature as originally scheduled on April 17, 2020.

The unpaid principal balance at June 30, 2017 of the 2018 Term A Loan, the 2020 Term A Loan and the Term B Loan was $28.4 million, $209.5 million and $384.0 million, respectively. The additional borrowing capacity for the Revolving Facility loan at June 30, 2017 was $52.0 million.

Notes payable

In December 2014, June 2015 and May 2016, EVERTEC Group entered into non-interest bearing financing agreements amounting to $4.6 million, $1.1 million, and $0.7 million, respectively, and in October 2016 entered into an interest bearing agreement of $1.1 million, to purchase software. As of June 30, 2017 and December 31, 2016, the outstanding principal balance of the notes payable is $2.4 million and $3.4 million, respectively. The current portion of these notes is recorded as part of accounts payable and the long-term portion is included in other long-term liabilities.

Interest Rate Swap

As of June 30, 2017, the Company has the following interest rate swap agreement converting a portion of the interest rate exposure on the Company's Term B loan from variable to fixed:



Effective date	Maturity Date	Notional Amount	Variable Rate	Fixed Rate
January 2017	April 2020	$200 million	1-month LIBOR	1.9225%

The Company has accounted for this transaction as a cash flow hedge. The fair value of the Company’s derivative instrument is determined using a standard valuation model. The significant inputs used in this model are readily available in public markets, or can be derived from observable market transactions, and therefore have been classified as Level 2 within the fair value hierarchy. Inputs used in this standard valuation model for derivative instruments include the applicable forward rates and discount rates. The discount rates are based on the historical LIBOR Swap rates.

As of June 30, 2017 and December 31, 2016, the carrying amount of the derivative on the Company’s balance sheet is as follows:



(Dollar amounts in thousands)	June 30, 2017		December 31, 2016
Other long-term liabilities	$	1,588	$	1,964

During the three and six months ended June 30, 2017, the Company reclassified losses of $0.5 million and $0.9 million respectively, from accumulated other comprehensive loss into income through interest expense. Based on current LIBOR rates, the Company expects to reclassify $1.7 million from accumulated other comprehensive loss into income through interest expense over the next 12 months. Refer to Note 6 for tabular disclosure of the fair value of derivatives and to Note 7 for tabular disclosure of gains recorded on cash flow hedging activities.

The cash flow hedge is considered highly effective and no impact on earnings is expected due to hedge ineffectiveness.