NOTE F – LONG-TERM DEBT

On September 24, 2013, we terminated our previously-existing revolving credit facility scheduled to expire in September 2014 and five-year variable rate financing agreement that we entered into November 30, 2012. Concurrently with these terminations, we and our domestic subsidiaries entered into a new senior secured credit facility that (i) increased our borrowing capacity to $95.0 million, with a potential increase to $145.0 million, (ii) reduced our covenant restrictions, (iii) extended the maturity date of our facility to September 24, 2018, (iv) further monetized the value of our U.S. assets, and (v) allowed us to refinance and retire all indebtedness outstanding under our previously-existing revolving credit facility and five-year variable rate financing agreement. The total amount paid off on September 24, 2013 was approximately $46.6 million, of which $21.0 million was drawn from the new revolving credit facility under the Credit Facility.

The Credit Facility includes a term loan facility in the principal amount of $45.0 million and a revolving credit facility (“LOC”) in the principal amount of $50 million. The LOC includes a $20.0 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swingline loans. The Credit Facility carries an accordion feature, whereby an additional term loan up to $50.0 million may be advanced subject to certain financial requirements. As of September 24, 2013, the Credit Facility had four lenders, each with commitments ranging from $15.0 million to $30.0 million. As of December 31, 2013, we had $21.0 million of borrowings and $3.7 million of letters of credit outstanding under our LOC, leaving an available balance of approximately $25.3 million.

The Credit Facility includes usual and customary covenants and events of default for credit facilities of its type. Our ability to borrow under the Credit Facility is conditioned upon continued compliance with such covenants, including, among others, (i) covenants that restrict our ability to engage in certain asset sales, mergers or other fundamental changes, to incur liens or to engage in various other transactions or activities and (ii) various financial covenants, including those that stipulate that we maintain a consolidated leverage ratio of 4.5 to 1.0 through the fiscal quarter ending December 31, 2013, and 4.25 to 1.0 thereafter, liquidity of not less than $15.0 million through the fiscal quarter ending December 31, 2013, and $20.0 million thereafter, and a consolidated net worth of not less than the sum of $228.0 million plus 50% of our consolidated net income earned after December 31, 2011 plus 100% of the proceeds of all issuances of equity interests received after December 31, 2011 (with all such terms or amounts as defined in or determined under the Credit Facility).

We categorized this refinancing as a debt extinguishment. The total fees associated with the Credit Facility included $1.4 million of bank fees and $148,000 of third party fees. Approximately $800,000 of the bank fees associated with the old term loan facility were expensed during the third quarter of 2013, while all the fees associated with new LOC facility will be deferred and amortized over the term of the Credit Facility.



Long-term debt consisted of the following:

		Interest Rate					Total Principal Due
(All Amount in Thousands)		Year Ended December 31,				Maturity	Year Ended December 31,
Description		2013		2012		Date	2013		2012
Secured:
Notes Payable – Variable Rate	(1)			2.0600	%		$	-	$	12,666
Notes Payable – Variable Rate	(3)	2.7451	%	2.8090	%	2018		15,460		18,896
Notes Payable – Variable Rate	(2,5)			2.7090	%			-		30,000
Notes Payable – Variable Rate		2.7400	%	2.81-2.85	%	2018		45,081		48,760
Notes Payable – Variable Rate		2.5188	%	2.5590	%	2017		11,383		13,436
Notes Payable – Variable Rate		2.9181	%	2.9810	%	2018		12,780		15,620
Notes Payable – Variable Rate	(3)	2.7384	%	2.8158	%	2018		16,651		17,908
Notes Payable – Variable Rate	(4)	2.8964	%	1.8314	%	2020		31,437		42,089
Notes Payable – Variable Rate	(5)	3.7500	%			2018		44,437		-
Unsecured Line of Credit-Old	(6)			3.9597	%			-		38,255
Secured Line of Credit-New	(5)	3.6700	%			2018		21,000		-
								198,229		237,630
		Less Current Maturities						(19,213)		(26,040)
							$	179,016	$	211,590

We had an interest rate swap agreement in place to fix the interest rate on our variable rate note payable expiring in 2015 at 4.41%. Upon early repayment of approximately $13.3 million to close this credit facility, the interest rate swap was settled and terminated in the third quarter of 2013.

2.We entered into a variable rate financing agreement with Capital One N.A. on November 30, 2012 for a five year facility totaling $30.0 million to finance a portion of the acquisition of UOS. This facility was fully drawn prior to the end of 2012. Upon execution of the new U.S. Senior Credit Facility, this credit facility was paid off in full. The early pre-payment amount was approximately $25.5 million.

3.We entered into a variable rate financing agreement with ING Bank N.V., London branch on June 20, 2011 for a seven year facility to finance the acquisition of a Cape Size vessel and a Supramax Bulk Carrier Newbuilding, both of which we acquired a 100% interest in as a result of our acquisition of Dry Bulk. Pursuant to the terms of the facility, the lender agreed to provide a secured term loan facility divided into two tranches: Tranche A, fully drawn on June 20, 2011 in the amount of $24.1 million, and Tranche B, providing up to $23.3 million of additional credit. Under Tranche B, we drew $6.1 million in November 2011 and $12.7 million on January 24, 2012.

4.We have a Yen interest rate swap agreement in place to fix the interest rate on our variable rate note payable expiring in 2020 at 2.065%. After applicable margin adjustments, the effective interest rate on this note payable is fixed at 4.815%. The swap agreement is for the same term as the associated note payable.

5.As described in greater detail above, on September 24, 2013, we entered into a senior secured Credit Facility. The Credit Facility matures on September 24, 2018 and includes a term loan facility in the principal amount of $45.0 million and a LOC, which allows for borrowing up to a principal amount of $50.0 million. The LOC facility includes a $20.0 million sublimit for the issuance of standby letters of credit and a $5.0 million sublimit for swingline loans. As of September 24, 2013, the Credit Facility had four lenders, each with commitments ranging from $15 million to $30 million. The facility carries an accordion feature, whereby an additional term loan up to $50.0 million may be advanced subject to certain financial requirements.

6.Our previously-existing unsecured line of credit agreement was paid off with the execution of the new secured credit facility on September 24, 2013.

During the second quarter of 2013, we deposited $9.8 million with ING Bank N.V., London Branch associated to maintain a minimum fair market value of five Dry Bulk Vessels to their loan balance. During third quarter of 2013, approximately $7.3 million of this deposit was returned due to increased vessel valuations in October 2013. A remaining deposit of approximately $2.5 million is still being held by ING pending the next appraisal in April 2014.

All of the debt listed in the chart above was either (i) issued directly by International Shipholding Corporation or (ii) issued by one or more subsidiaries of International Shipholding Corporation and guaranteed by International Shipholding Corporation. Our variable rate notes payable and our line of credit are secured by assets with an aggregate book value of approximately $422.3 million as of December 31, 2013, and by a security interest in certain operating contracts and receivables.

The aggregate principal payments required as of December 31, 2013, for each of the next five years are approximately $19.2 million in 2014, $20.3 million in 2015, $21.2 million in 2016, $44.9 million in 2017, $77.3 million in 2018, and $15.3 million thereafter.

Our debt agreements, among other things, impose defined minimum working capital, minimum liquidity, and net worth requirements, impose leverage requirements, and prohibit us from incurring, without prior written consent, additional debt or lease obligations, except as defined. As of December 31, 2013, we met all of the financial covenants under our various debt agreements among other things, the most restrictive of which include the working capital, leverage ratio, minimum net worth and interest coverage ratios.

In addition to the restrictions under our new Credit Facility, certain of our loan agreements restrict the ability of our subsidiaries to dispose of collateralized assets or any other asset which is substantial in relation to our assets taken as a whole without the approval from the lender. We have remained in compliance with this provision of these loan agreements for all periods presented.