NOTE 7—DEBT

The carrying values of our long-term debt obligations, net of debt issuance costs of $18 million and $20 million as of March 31, 2016 and December 31, 2015, respectively, are as follows:

	March 31, 2016		December 31, 2015
	(In thousands)
Senior Notes	$	492,306	$	491,890
Term Loan		289,771		289,979
North Ocean 105 Construction Financing		38,399		38,263
Amortizing Notes		18,005		21,205
Capital lease obligation		2,458		2,546
		840,939		843,883
Less: Amounts due within one year		25,298		24,882
Total long-term debt	$	815,641	$	819,001

Credit Agreement, Senior Notes and Amortizing Notes

In April 2014 we entered into a credit agreement (the “Credit Agreement”), which initially provided for a $400 million first-lien, first-out three-year letter of credit facility (the “LC Facility”), which is scheduled to mature in 2017, and a $300 million first-lien, second-out five-year term loan (the “Term Loan”), which is scheduled to mature in 2019. We also completed the issuance of (a) $500 million of second-lien, seven-year, senior secured notes; and (b) $288 million of tangible equity units (“TEUs”) composed of (1) three-year amortizing, senior unsecured notes, in an aggregate principal amount of $48 million, and (2) prepaid common stock purchase contracts.

In October 2015, we entered into an Amendment No. 1, which amended the Credit Agreement primarily to increase the existing LC Facility from $400 million to $520 million.

In February 2016, we entered into an Amendment No. 2 to the Credit Agreement, which amended the Credit Agreement to permit us to add to Covenant EBITDA certain cash restructuring expenses related to the conclusion of MPI or implementation of AOR for the quarters ending on or after March 31, 2016 but before April 16, 2017, in an aggregate amount not to exceed $25 million (as of any date of determination).

On April 18, 2016, we entered into an Amendment No. 3 to the Credit Agreement, which, among other things:

replaced the existing EBITDA covenant with new ratios (as defined in Amendment No. 3) as follows:

a minimum fixed charge coverage ratio of 1.15x for the fiscal quarter ended March 31, 2016 and each fiscal quarter thereafter;

a maximum total leverage ratio of 4.5x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through June 30, 2017, 4.0x for the fiscal quarters ending September 30, 2017 and December 31, 2017, and 3.5x for each fiscal quarter thereafter; and

a maximum secured leverage ratio of 2.0x for the fiscal quarter ended March 31, 2016 and each subsequent fiscal quarter through December 31, 2017, and 1.5x for each fiscal quarter thereafter;

amended the maximum capital expenditure covenant to limit capital expenditures in 2016 and thereafter to $250 million each fiscal year, with any prior fiscal year unused capital expenditure up to $125 million able to be carried forward and added to the next year’s capital expenditure capacity, for a total of $375 million.

This change to our financial covenants was effective for the covenants tested as of March 31, 2016, and we were in compliance with these requirements, as shown below:

Ratios	Requirement	Actual
Minimum fixed charge coverage ratio	1.15x	2.75x
Maximum total leverage ratio	4.5x	2.50x
Maximum secured leverage ratio	2x	0.94x

As of March 31, 2016 and December 31, 2015, the aggregate face amount of letters of credit issued under the LC Facility was $467 million and $384 million, respectively. No financial letters of credit have been issued under the LC Facility.

The LC Facility permits us to deposit up to $300 million with letter of credit issuers to cash collateralize letters of credit issued on a bilateral basis outside the credit facility. As of March 31, 2016 and December 31, 2015, we had an aggregate face amount of approximately $100 million and $102 million of such letters of credit outstanding supported by cash collateral, including financial letters of credit of $43 million and $45 million, respectfully. We have included the supporting cash collateral in restricted cash and cash equivalents in the accompanying Consolidated Balance Sheets.

Also, in April 2016, we entered into an unsecured and uncommitted bilateral letter of credit arrangement for approximately $100 million with a Middle Eastern bank. The newly issued bilateral letter of credit arrangement is anticipated to support our Middle Eastern business.

North Ocean Financing

NO 105―On September 30, 2010, MDR, as guarantor, and North Ocean 105 AS, in which we have a 75% ownership interest, as borrower, entered into a financing agreement to finance a portion of the construction costs of the NO 105. Borrowings under the agreement are secured by, among other things, a pledge of all of the equity of North Ocean 105 AS, a mortgage on the NO 105, and a lien on substantially all of the other assets of North Ocean 105 AS. MDR unconditionally guaranteed all amounts to be borrowed under the agreement. Under the current LC Facility, we are required to exercise our option under the North Ocean 105 AS joint venture agreement to purchase Oceanteam ASA’s 25% ownership interest in the vessel-owning company and repay the outstanding NO 105 debt by April 2017.

Bank Guarantees

In 2015, MDR executed a reimbursement agreement with a Middle East based bank which provides an uncommitted line of credit in support of our contracting activities in the Middle East. There are no administrative or commitment fees associated with the agreement. As of March 31, 2016, bank guarantees issued under that agreement were $28 million. Bank guarantees issued under other general reimbursement arrangements totaled $101 million and $100 million, as of March 31, 2016 and December 31, 2015, respectively.

Surety Bonds

As of March 31, 2016 and December 31, 2015, surety bonds issued under general agreements of indemnity in favor of surety underwriters in support of contracting activities of our subsidiaries J. Ray McDermott de México, S.A. de C.V. and McDermott, Inc. totaled $73 million and $54 million, respectively.