NOTE H — LONG TERM DEBT

Long-term debt consists of the following:

	June 30,			December 31,
(In thousands)	2014			2013

Revolving Credit Facility	$	90,000		$	25,000
Term Loan	219,375			222,188
7 1/8 % Senior Notes due 2018	200,000			200,000
Subordinated seller notes, non-collateralized, net of unamortized discount with principal and interest payable in either monthly, quarterly or annual installments at effective interest rates ranging from 2.00% to 4.00%, maturing through November 2018	30,514			21,071
Total Debt	539,889			468,259
Less current portion	(23,638		)	(15,998		)
Long Term Debt	$	516,251		$	452,261

Refinancing

During the second quarter of 2013 the Company refinanced its bank credit facilities through a new 5 year Credit Agreement that increased its senior secured facilities to an aggregate principal amount of up to $425.0 million from $400.0 million previously. The new Credit Agreement includes a $200.0 million revolving credit facility and a $225.0 million term loan facility. Each new facility matures on June 17, 2018 and is subject to a leveraged-based pricing grid, with initial pricing of LIBOR plus 1.75%. In conjunction with the refinancing, the Company incurred a pre-tax non-cash charge of approximately $6.6 million during the second quarter of 2013 related to the write-off of existing debt issuance costs associated with its previous credit agreement. No prepayment penalties were incurred.

Revolving Credit Facility

The $200.0 million Revolving Credit Facility matures on June 17, 2018 and bears interest at LIBOR plus 1.75%, or the applicable rate (as defined in the Credit Agreement). As of June 30, 2014, the Company had $106.4 million available under this facility. The outstanding amounts borrowed under the Revolving Credit Facility as of June 30, 2014 were $90 million, including standby letters of credit of approximately $3.6 million. The obligations under the Revolving Credit Facility are senior obligations, are guaranteed by the Company’s subsidiaries, and are secured by a first priority perfected security interest in all of the Company’s assets, all the assets of the Company’s subsidiaries and the equity interests of the Company’s subsidiaries.

The carrying values of the Company’s outstanding Revolving Credit Facilities as of June 30, 2014 and December 31, 2013, were $90.0 million and $25.0 million, respectively. The Company has determined the carrying value on these loans approximates fair value for debt with similar terms and remaining maturities based on interest rates currently available and has therefore concluded these are Level 2 measurements.

Term Loan Facility

The Term Loan Facility, of which $219.4 million is outstanding, matures on June 17, 2018 and bears interest at LIBOR plus 1.75%, or the applicable rate (as defined in the Credit Agreement). Quarterly principal payments ranging from 0.625% to 3.75% of the initial principal borrowed are required throughout the life of the Term Loan. From time to time, mandatory prepayments may be required as a result of certain additional debt incurrences, certain asset sales, or other events as defined in the Credit Agreement. No mandatory prepayments have been required under our Term Loan Agreement to date. The obligations under the Term Loan Facility are senior obligations, are guaranteed by the Company’s subsidiaries, and are secured by a first priority perfected security interest in all of the Company’s assets, all the assets of the Company’s subsidiaries and the equity interests of the Company’s subsidiaries.

The carrying values of the Company’s outstanding Term Loans as of June 30, 2014 and December 31, 2013, were $219.4 million and $222.2 million, respectively. The Company has determined the carrying value on these loans approximates fair value for debt with similar terms and remaining maturities based on interest rates currently available and has therefore concluded these are Level 2 measurements.

71/8% Senior Notes

The 7 1/8 % Senior Notes mature November 15, 2018, senior indebtedness, and are guaranteed on a senior unsecured basis by all of the Company’s subsidiaries. Interest is payable semi-annually on May 15 and November 15 of each year.

Prior to November 15, 2014, the Company may redeem all or some of the notes at a redemption price of 103.6% of outstanding principal amount plus and amount equal to the unaccrued interest that would otherwise have become due from the redemption date through November 15, 2014. On or after November 15, 2014, the Company may redeem all or a part of the notes with a premium, as described in further detail in the Company’s Annual Report on form 10-K for the year ended December 31, 2013.

The carrying value of the Senior Notes was $200.0 million as of June 30, 2014 and December 31, 2013. The fair value of the Senior Notes was $210.0 million and $213.3 million as of June 30, 2014 and December 31, 2013, respectively. The Company has determined the fair value of the Senior Notes based on market observable inputs and has therefore concluded these are Level 2 measurements.

Seller Notes

Seller Notes are recorded at contractual carrying values of $30.5 million and $21.1 million as of June 30, 2014 and December 31, 2013, respectively, and carrying value approximates fair value for similar debt in all material respects. The Company estimates fair value of the seller notes with a discounted cash flow model using unobservable rates and has determined these represent Level 3 measurements.

Subsidiary Guarantees

The Revolving and Term Loan Facilities and the 7 1/8 % Senior Notes are guaranteed by all of the Company’s subsidiaries. Separate condensed consolidating information is not included because Hanger, Inc., the parent company, does not have independent assets or operations. The guarantees are full and unconditional and joint and several. There are no restrictions on the ability of the Company’s subsidiaries to transfer cash to the Company or to co-guarantors.

Debt Covenants

The terms of the Senior Notes, the Revolving Credit Facility, and the Term Loan Facility limit the Company’s ability to, among other things, purchase capital assets, incur additional indebtedness, create liens, pay dividends on or redeem capital stock, make certain investments, make restricted payments, make certain dispositions of assets, engage in transactions with affiliates, engage in certain business activities, and engage in mergers, consolidations and certain sales of assets. The Credit Agreement requires compliance with various covenants including but not limited to (i) minimum consolidated interest coverage ratio of 3.50:1.00 and (ii) maximum total leverage ratio of 4.00:1.00. As of June 30, 2014, the Company was in compliance with all covenants under these debt agreements.