Long-Term Debt

Total debt consists of the following:



(in thousands)	December 31, 2018		December 31, 2017
Term loan A-1	287,699		436,500
Term loan A-2	497,537		400,000
	785,236		836,500
Less: unamortized loan fees	14,994		14,542
Total debt, net of unamortized loan fees	$	770,242	$	821,958

Current maturities of long-term debt, net of current unamortized loan fees	$	20,618	$	64,397
Long-term debt, less current maturities, net of unamortized loan fees	$	749,624	$	757,561

On December 18, 2015, the Company entered into a Credit Agreement (as amended, the “2016 credit agreement”) with various banks and other financial institutions party thereto and CoBank, ACB, as administrative agent for the lenders, providing for three facilities: (i) a five-year revolving credit facility of up to $75 million; (ii) a five-year term loan facility of up to $485 million (Term Loan A-1”); and (iii) a seven-year term loan facility of up to $400 million (“Term Loan A-2”), (collectively our "Credit Facility").

In connection with the closing of the nTelos acquisition, the Company borrowed (i) $485 million under Term Loan A-1 and (ii) $325 million under Term Loan A-2, which amounts were used to, among other things, fund the payment of the nTelos merger consideration, to refinance, in full, all indebtedness under the Company’s existing credit agreement, to repay existing long-term indebtedness of nTelos and to pay fees and expenses in connection with the foregoing. In connection with the consummation of the nTelos acquisition, nTelos and its subsidiaries became guarantors and pledged their assets as security for the obligations under the 2016 credit agreement. The 2016 credit agreement also included $75 million available under the Term Loan A-2 as a delayed draw term loan, and as of December 2016, the Company drew $50 million under this portion of the agreement and in January 2017 the Company drew the remaining $25 million. Additionally, the 2016 credit agreement included a $75 million Revolver Facility and permitted the Company to enter into one or more Incremental Term Loan Facilities not to exceed $150 million in the aggregate.

During 2018, the 2016 credit agreement was amended (the "amended 2016 credit agreement") to: (i) shift $108.8 million in principal from Term Loan A-1 to Term Loan A-2; (ii) reduce near term principal payments; (iii) extend the maturity of Term Loan A-1 to 2023, Term Loan A-2 to 2025 and allow access to the Revolver through 2023; and (iv) reduce the applicable base interest rate by 75 basis points, (collectively our "Amended Credit Facility").

At December 31, 2018, the full $75 million was available under the Revolver Facility and the Company had not entered into any Incremental Loan Facilities. The debt issuance costs associated with the Revolver Facility are included in deferred charges and other assets, net on the consolidated balance sheets, and are amortized on a straight-line basis over the life of the Revolver Facility.

As of December 31, 2018, the Company’s indebtedness totaled approximately $770.2 million, net of unamortized loan fees of $15.0 million, with an annualized overall weighted average interest rate of approximately 3.97%. As of December 31, 2018, the Term Loan A-1 bears interest at one-month LIBOR plus a margin of 1.75%, while the Term Loan A-2 bears interest at one-month LIBOR plus a margin of 2.00%. LIBOR resets monthly.

The amended Term Loan A-1 requires quarterly principal repayments of $3.6 million, which began on December 31, 2018 through September 30, 2019, increasing to $7.3 million quarterly from December 31, 2019 through September 30, 2022; then increasing to $10.9 million quarterly from December 31, 2022 through September 30, 2023, with the remaining balance due November 8, 2023. The amended Term Loan A-2 requires quarterly principal repayments of $1.2 million which began on December 31, 2018 through September 30, 2025, with the remaining balance due November 8, 2025.

The 2016 credit agreement required the Company to enter into one or more hedge agreements to manage its exposure to interest rate movements. The amended 2016 credit agreement does not include this requirement; however, the Company made no changes to its existing pay-fixed, receive-variable swaps that were already in place. The Company will receive one month LIBOR and pay a fixed rate of 1.16%, in addition to the 2.75% initial spread on Term Loan A-1 and the 3.00% initial spread on Term Loan A-2.

The amended 2016 credit agreement contains affirmative and negative covenants customary to secured credit facilities, including covenants restricting the ability of the Company and its subsidiaries, subject to negotiated exceptions, to incur additional indebtedness and additional liens on their assets, engage in mergers or acquisitions or dispose of assets, pay dividends or make other distributions, voluntarily prepay other indebtedness, enter into transactions with affiliated persons, make investments, and change the nature of the Company’s and its subsidiaries’ businesses. In aggregate, dividends paid, distributions and redemptions of capital stock made cannot exceed the sum of $25 million plus 60% of the Company's consolidated net income (excluding non-cash extraordinary items such as write-downs or write-ups of assets) from January 1, 2016 to the date of declaration of such dividends, distributions or redemptions.

Indebtedness outstanding under any of the facilities may be accelerated by an Event of Default, as defined in the amended 2016 credit agreement.

The Amended Credit Facility is secured by a pledge by the Company of its stock and membership interests in its subsidiaries, a guarantee by the Company’s subsidiaries other than Shenandoah Telephone Company, and a security interest in substantially all of the assets of the Company and the guarantors.

The Company is subject to certain financial covenants to be measured on a trailing twelve month basis each calendar quarter unless otherwise specified. These covenants include:


•	a limitation on the Company’s total leverage ratio, defined as indebtedness divided by earnings before interest, taxes, depreciation and amortization, or EBITDA, of less than or equal to 3.50 to 1.00 from December 31, 2018 through December 31, 2019, then 3.25 to 1.00 through December 31, 2021, and 3.00 to 1.00 thereafter;


•	a minimum debt service coverage ratio, defined as EBITDA minus certain cash taxes divided by the sum of all scheduled principal payments on the Term Loans and other indebtedness plus cash interest expense, greater than or equal to 2.00 to 1.00;


•	the Company must maintain a minimum liquidity balance, defined as availability under the Revolver Facility plus unrestricted cash and cash equivalents on deposit in a deposit account for which a control agreement has been delivered to the administrative agent under the 2016 credit agreement, of greater than $25 million at all times.

As shown below, as of December 31, 2018, the Company was in compliance with the financial covenants in its credit agreements.



	Actual		Covenant Requirement
Total leverage ratio	2.54		3.50 or Lower
Debt service coverage ratio	3.63		2.00 or Higher
Minimum liquidity balance (in millions)	$	159.0	$25.0 or Higher

Future maturities of long-term debt principal are as follows:



Year Ending	Amount
(in thousands)
2019	$	23,197
2020	34,122
2021	34,122
2022	37,764
2023	183,434
2024 and after	472,597
Total	$	785,236

The Company has no fixed-rate debt instruments as of December 31, 2018. The estimated fair value of the variable-rate debt approximates its carrying value due to its floating interest rate structure.

The Company receives patronage credits from CoBank and certain of its affiliated Farm Credit institutions, which are not reflected in the stated rates shown above. Patronage credits are a distribution of profits of CoBank as approved by its Board of Directors. During the first quarter of the year, the Company receives patronage credits on its average outstanding CoBank debt balance during the prior fiscal year. The Company accrued $2.8 million in non-operating income in the year ended December 31, 2018, in anticipation of the early 2019 distribution of the credits by CoBank. Patronage credits have historically been paid in a mix of cash and shares of CoBank stock. The 2018 payout mix was 75% cash and 25% shares. CoBank also provided a one-time cash distribution of $0.2 million in September 2018 in an effort to share the benefits of federal tax reform legislation with its eligible customer-owners.