Debt and Short-Term Borrowings

6 Months Ended

Jun. 30, 2021

Debt Disclosure [Abstract]

Debt and Short-Term Borrowings

Debt and Short-Term Borrowings

Total debt at June 30, 2021 and December 31, 2020 follows:

(In thousands)	June 30, 2021		December 31, 2020
2023 Term A Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(2))	$	176,161	$	188,788
2024 Term B Loan bearing interest at a variable interest rate (LIBOR plus applicable margin(1)(3))	294,923		306,503
Note payable due January 1, 2022(1)	721		1,443
Total debt	$	471,805	$	496,734

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

(2)Applicable margin of 1.75% at June 30, 2021 and December 31, 2020.

(3)Subject to a minimum rate ("LIBOR floor") of 0% plus applicable margin of 3.50% at June 30, 2021 and December 31, 2020.

Secured Credit Facilities

On November 27, 2018, EVERTEC and EVERTEC Group, LLC ("EVERTEC Group") (collectively, the “Borrower”) entered into a credit agreement providing for the secured credit facilities, consisting of a $220.0 million term loan A facility that matures on November 27, 2023 (the “2023 Term A Loan"), a $325.0 million term loan B facility that matures on November 27, 2024 (the “2024 Term B Loan”), and a $125.0 million revolving credit facility (the “Revolving Facility”) that matures on November 27, 2023, with a syndicate of lenders and Bank of America, N.A. (“Bank of America”), as administrative agent, collateral agent, swingline lender and line of credit issuer (collectively the “2018 Credit Agreement”).

The 2018 Credit Agreement requires mandatory repayment of outstanding principal balances based on a percentage of excess cash flow, provided that no such payment shall be due if the resulting amount of the excess cash flow multiplied by the applicable percentage is less than $10 million. On March 8, 2021 and March 5, 2020, in connection with this mandatory repayment clause, the Company repaid $17.8 million and $17.0 million, respectively, as a result of excess cash flow calculation performed for the years ended December 31, 2020 and 2019, respectively.

The unpaid principal balance at June 30, 2021 of the 2023 Term A Loan and the 2024 Term B Loan was $177.1 million and $297.5 million, respectively. The additional borrowing capacity under our Revolving Facility at June 30, 2021 was $119.1 million. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Notes Payable

In December 2019, EVERTEC Group entered into two non-interest bearing financing agreements amounting to $2.4 million to purchase software and maintenance. As of June 30, 2021 and December 31, 2020, the outstanding principal balance of the notes payable was $0.8 million and $1.5 million, respectively. These notes are included in accounts payable in the Company's unaudited condensed consolidated balance sheets.

Interest Rate Swaps

As of June 30, 2021, the Company has an interest rate swap agreement, entered into in December 2018, which converts a portion of the interest rate payments on the Company's 2024 Term B Loan from variable to fixed: 

Swap Agreement	Effective date	Maturity Date	Notional Amount	Variable Rate	Fixed Rate
2018 Swap	April 2020	November 2024	$250 million	1-month LIBOR	2.89%

The Company has accounted for this agreement as a cash flow hedge.

As of June 30, 2021 and December 31, 2020, the carrying amount of the derivative included on the Company's unaudited condensed consolidated balance sheets was $19.8 million and $25.6 million, respectively. The fair value of this derivative is estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 8 for disclosure of losses recorded on cash flow hedging activities.

During the three and six months ended June 30, 2021, the Company reclassified losses of $1.8 million and $3.5 million, respectively, from accumulated other comprehensive loss into interest expense compared to $1.4 million and $1.6 million for the corresponding period in 2020. Based on current LIBOR rates, the Company expects to reclassify losses of $7.0 million from accumulated other comprehensive loss into interest expense over the next 12 months.

The cash flow hedge is considered highly effective.