Debt and Short-Term Borrowings

9 Months Ended

Sep. 30, 2023

Debt Disclosure [Abstract]

Debt and Short-Term Borrowings

Debt and Short-Term Borrowings

Debt at September 30, 2023 and December 31, 2022 was as follows:

(In thousands)	September 30, 2023		December 31, 2022
2027 Term A Loan bearing interest at a variable interest rate (SOFR plus applicable margin(1)(2))	$	395,406	$	410,248
Revolving credit facility(2)	6,000		20,000
Note payable due on September 1, 2030(1)	7,911		$	—

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

(2)Subject to a minimum rate ("SOFR floor") of 0% plus applicable margin of 1.50% at September 30, 2023 and December 31, 2022.

Secured Credit Facilities

On December 1, 2022, EVERTEC and EVERTEC Group, entered into a credit agreement with a syndicate of lenders and Truist Bank, as administrative agent and collateral agent, providing for (i) a $415.0 million term loan A facility (the “Term Loan Facility”) and (ii) a $200.0 million revolving credit facility (the “Revolving Facility”, and together with the Term Loan Facility, the “2022 Credit Facilities”). The 2022 Credit Facilities mature on December 1, 2027.

At September 30, 2023, the unpaid principal balance of the Term Loan Facility was $399.4 million. At September 30, 2023, there was $6.0 million outstanding on the Revolving Facility and the additional borrowing capacity was $188.0 million, considering letters of credit issued. The Company issues letters of credit against the Revolving Facility which reduce the additional borrowing capacity of the Revolving Facility.

Notes Payable

In September 2023, EVERTEC Group entered into a non-interest bearing financing agreement amounting to $10.1 million to purchase software and maintenance which the Company recorded on a discounted basis using an implied interest of 6.9%. As of September 30, 2023, the outstanding principal balance of the note payable on a discounted basis was $7.9 million. The current portion of the note is included in accounts payable and the long-term portion is included in other long-term liabilities on the Company's unaudited condensed consolidated balance sheet.

Interest Rate Swaps

As of September 30, 2023, the Company has two interest rate swap agreements, entered into in December 2018 and May 2023, which convert a portion of the interest rate payments on the Company's Term Loan Facility 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 SOFR	2.929%
2023 Swap	November 2024	December 2027	$250 million	1-month SOFR	3.375%

As of September 30, 2023 and December 31, 2022, the carrying amount of the derivatives included on the Company's unaudited condensed consolidated balance sheets was $11.5 million and $7.4 million, respectively. The fair value of these derivatives are estimated using Level 2 inputs in the fair value hierarchy on a recurring basis. Refer to Note 9 for disclosure of gains recorded on cash flow hedging activities.

During the three and nine months ended September 30, 2023, the Company reclassified gains of $1.6 million and $4.0 million, respectively, from accumulated other comprehensive income into interest expense compared to losses of $0.4 million and $3.5 million, respectively, for the corresponding periods in 2022. Based on current SOFR rates, the Company expects to reclassify gains of $6.2 million from accumulated other comprehensive income into interest expense over the next 12 months.

The cash flow hedge is considered highly effective.