FINANCING ARRANGEMENTS

Financing arrangements are maintained with several financial institutions. These financing arrangements are in the form of long term loans, credit facilities, and lines of credit. The credit facilities allow the Company to borrow up to $68.6 million at December 31, 2017, of which $51.3 million can be borrowed for working capital needs. As of December 31, 2017, $59.6 million was available for borrowing under these arrangements of which $50.8 million was available for working capital needs. There were no borrowings outstanding at December 31, 2017. Total consolidated term borrowings outstanding, net of unamortized debt issuance fees were $5.9 million at December 31, 2016. Additionally, the Company had borrowings under revolving credit facilities of $0.7 million at December 31, 2016. Details of these financing arrangements are discussed below.

Long-term Debt

Long-term debt consists of (in thousands):



	December 31,
	2017		2016
Term loans, net of unamortized debt issuance fees	—		5,893
Current portion, net of unamortized debt issuance fees	—		(2,923		)
Total long-term debt, less current portion	$	—	$	2,970

In January 2016 we adopted guidance which requires that debt issuance costs related to a recognized debt liability to be presented in the balance sheet as a direct deduction from the carrying amount of that debt liability, consistent with debt discounts. Unamortized debt issuance costs of $0.07 million and $0.02 million were recorded as "Current portion of long-term debt" and "Long-term debt" respectively to reduce the carrying amount of debt liability on the Consolidated Balance Sheets at December 31, 2016. The Company's debt issuance cost amortization was not affected by the adoption of the new guidance.

In May 2013, the Company and Hardinge Holdings GmbH, a direct wholly-owned subsidiary, entered into a term loan agreement with a bank pursuant to which the bank provided a $23.0 million secured term loan facility for the acquisition of Forkardt. The agreement was amended in October 2013 and was scheduled to mature in April 2018, however the Company chose to pay the debt early in August 2017. The interest rate on the term loan was determined from a pricing grid with the London Interbank Offered Rate ("LIBOR") and base rate options based on the Company's leverage ratio and was 0.00% at December 31, 2016. The principal amount outstanding at December 31, 2016 was $3.1 million.

In November 2013, the Company and Hardinge Holdings GmbH entered into a replacement term loan agreement with the same bank pursuant to which the bank converted $10.8 million of the then outstanding principal on the term loan to CHF 3.8 million ($3.7 million equivalent) and EUR 5.0 million ($5.3 million equivalent) borrowings. The CHF principal balance was paid in full in November 2016. The interest rate on the EUR portion of the term loan was determined with a pricing grid with the Euro Interbank Offered Rate ("EURIBOR") and base rate options based on the Company's leverage ratio and was 1.88% at December 31, 2016. The principal amount outstanding at December 31, 2016 was EUR $2.8 million ($2.9 million equivalent). The EUR principal balance was paid in full in August 2017.

The term loan was secured by (i) liens on all of the Company's U.S. assets (exclusive of real property); (ii) a pledge of 65% of the Company's investment in Hardinge Holdings GmbH; (iii) a negative pledge on the Company's headquarters in Elmira, New York; (iv) liens on all of the personal property assets of Hardinge Grinding Group (formerly Usach), Forkardt Inc. (formerly Cherry Acquisition Corporation) and Hardinge Technology Systems Inc., a wholly-owned subsidiary and owner of the real property comprising the Company's world headquarters in Elmira, New York ("Technology"); and (v) negative pledges on the intellectual property of the Revolving Credit Borrowers and Technology.

The loan agreement contained financial covenants requiring a minimum fixed charge coverage ratio of not less than 1.15 to 1.00 (tested quarterly on a rolling four-quarter basis), a maximum consolidated total leverage ratio of 3.00 to 1.00 (tested quarterly on a rolling four-quarter basis), and maximum annual consolidated capital expenditures of $10.0 million. The loan agreement also contains such other representations, affirmative and negative covenants, prepayment provisions and events of default that are customary for these types of transactions. The Company was in compliance with the covenants under the loan agreement and is no longer subject to these covenants as this loan was paid in full.

Credit Facilities

The Company maintains various credit facilities for working capital and export business purposes. These facilities allow us to borrow funds and issue letters of credit in various currencies as required in the normal course of our business. A summary of the credit facilities is as follows (in thousands):



December 31, 2017
Revolving Credit Facilities:		Purpose	Exp. Date	Interest Rate	Total Line (USD)	Borrowings Outstanding	Letters of Credit Outstanding	Total Availability (for purpose as noted)
Domestic Facilities:
	M&T Bank⁽¹⁾	Working Capital and Letters of Credit	4/30/18	3.38%	$25,000	$—	$506	$24,494
	Chemung Canal Trust Company	Working Capital and Letters of Credit	6/30/18	5.00%	3,000	—	—	3,000
Foreign Facilities:
	Credit Suisse⁽²⁾	Working Capital and Letters of Credit	7/31/18	Variable	18,473	—	6,163	12,310
	UBS⁽³⁾	Working Capital and Letters of Credit	N/A	Variable	1,026	—	509	517
	Mega International Bank⁽⁴⁾	Working Capital and Letters of Credit	6/12/18	Variable	12,000	—	—	12,000
	China Construction Bank⁽⁵⁾	Working Capital and Letters of Credit	12/17/18	4.79%	3,074	—	—	3,074
	Bank of China⁽⁶⁾	Letters of Credit	7/5/18	—	3,074	—	452	2,622
	HSBC⁽⁷⁾	Letters of Credit	8/15/18	—	3,000	—	1,461	1,539
Total Revolving Debt Facilities					$68,647	$—	$9,091	$59,556



December 31, 2016
Revolving Credit Facilities:		Purpose	Exp. Date	Interest Rate	Total Line (USD)	Borrowings Outstanding	Letters of Credit Outstanding	Total Availability (for purpose as noted)
Domestic Facilities:
	M&T Bank⁽¹⁾	Working Capital and Letters of Credit	4/30/18	2.94%	$25,000	$—	$1,107	$23,893
	Chemung Canal Trust Company	Working Capital and Letters of Credit	6/30/17	5.00%	3,000	24	—	2,976
Foreign Facilities:
	Credit Suisse⁽²⁾	Working Capital and Letters of Credit	7/31/18	Variable	17,661	—	4,979	12,682
	UBS⁽³⁾	Working Capital and Letters of Credit	N/A	Variable	6,868	—	155	6,713
	Mega International Bank⁽⁴⁾	Working Capital and Letters of Credit	6/12/17	Variable	12,000	679	—	11,321
	China Construction Bank⁽⁵⁾	Working Capital and Letters of Credit	12/10/17	4.79%	2,880	—	—	2,880
	Bank of China⁽⁶⁾	Letters of Credit	8/25/17	—	4,320	—	83	4,237
	Industrial and Commercial Bank of China	Letters of Credit	7/31/16	—	—	—	—	—
	HSBC⁽⁷⁾	Letters of Credit	8/15/17	—	3,000	—	605	2,395
Total Revolving Debt Facilities					$74,729	$703	$6,929	$67,097

⁽¹⁾This credit facility is secured by substantially all of the Company's U.S. assets (exclusive of real property), a negative pledge on its worldwide headquarters in Elmira, NY, and a pledge of 65% of our investment in Hardinge Holdings GmbH. The credit facility charges a 0.25% commitment fee on unused funds and does not include any financial covenants.

⁽²⁾ This facility charges a commitment fee on the average unutilized amount of the facility of 30% of the applicable margin. The terms of the credit facility contains customary representations, affirmative, negative and financial covenants and events of default and is secured by mortgage notes in an aggregate amount of CHF 9.2 million ($9.0 million equivalent) on two buildings owned by Kellenberger. The facility is also subject to a minimum equity covenant requirement whereby the equity of both the Holdings Group and Kellenberger must be at least 35% of the subsidiary's balance sheet total assets. At December 31, 2017, the Company was in compliance with the covenants under the loan agreement.

⁽³⁾In 2016 this facility was secured by Kellenberger's real property up to CHF 3.0 million ($2.9 million equivalent) and was subject to a minimum equity covenant requirement where the minimum equity for Kellenberger must be at least 35% of its balance sheet total assets. In 2017 the facility was renewed unsecured with no covenant requirements.

⁽⁴⁾ Secured by the buildings and land owned by Hardinge Taiwan Precision Machinery Limited.

⁽⁵⁾ This facility is secured by real property owned by Hardinge Machine Co. Ltd.

⁽⁶⁾ Individual letters of credit issued under this facility require a cash deposit of 30% of the face value of the letter of credit.

⁽⁷⁾ Secured with a $1.2 million cash deposit.

Interest Paid

Interest paid in 2017, 2016 and 2015 totaled $0.2 million, $0.4 million and $0.3 million respectively.