8. Long-Term Debt and Lines of Credit

A summary of long-term debt follows:

(dollars in thousands)	July 31, 2016		August 2, 2015			May 1, 2016
Unsecured senior term notes	$	-	$	2,200		$	-
Current maturities of long-term debt		-		(2,200	)		-
Long-term debt, less current maturities
of long-term debt	$	-	$	-		$	-

Unsecured Senior Term Notes

We entered into a note agreement dated August 11, 2008 that provided for the issuance of $11.0 million of unsecured senior term notes with a fixed interest rate of 8.01% and a term of seven years. Principal payments of $2.2 million per year were due on the notes beginning August 11, 2011. On August 11, 2015, we paid our last annual payment of $2.2 million and this agreement has been paid in full.

Revolving Credit Agreement – United States

Our Credit Agreement with Wells Fargo Bank, N.A. (“Wells Fargo”) provides a revolving loan commitment of $30 million. Interest was charged at a rate (applicable interest rate of 1.94% at July 31, 2016) as a variable spread over LIBOR based on our ratio of debt to EBITDA. The Credit Agreement contains certain financial and other covenants as defined in the agreement and is set to expire on August 15, 2018.

The purpose of our revolving credit line is to support potential short term cash needs in different jurisdictions within our global operations, mitigate our risk associated with foreign currency exchange rate fluctuations, and repatriate earnings and profits from our foreign subsidiaries to the U.S. for various strategic purposes.

At July 31, 2016, we had outstanding borrowings associated with the Credit Agreement totaling $7.0 million. These outstanding borrowings are secured by a pledge of 65% of the common stock of Culp International Holdings Ltd. (our subsidiary located in the Cayman Islands), as required by the Credit Agreement. There were no borrowings outstanding under the Credit Agreement at August 2, 2015, and May 1, 2016, respectively.

At July 31, 2016, August 2, 2015, and May 1, 2016, there were $250,000 in outstanding letters of credit (all of which related to workers compensation) provided by the Credit Agreement.

Effective August 1, 2016, we entered into a Third Amendment to our Credit Agreement that will allow us to issue letters of credit not to exceed $7.5 million. On August 3, 2016, we issued a $5.0 million letter of credit (all of which is currently outstanding and in addition to the $250,000 letter of credit noted above) for the construction of a new building associated with our mattress fabrics segment (see Note 15 for further details). This $5.0 million letter of credit will be automatically reduced in $1.25 million increments on August 1, 2017, November 1, 2017, February 1, 2018, and May 15, 2018, respectively.

Revolving Credit Agreement – China

We have an unsecured credit agreement associated with our operations in China that provides for a line of credit of up to 40 million RMB (approximately $6.0 million USD at July 31, 2016), that expires on March 8, 2017. This agreement has an interest rate determined by the Chinese government and there were no borrowings outstanding as of July 31, 2016, August 2, 2015, and May 1, 2016.

Overall

Our loan agreements require, among other things, that we maintain compliance with certain financial covenants. At July 31, 2016, the company was in compliance with these financial covenants.

The fair value of the company’s long-term debt is estimated by discounting the future cash flows at rates currently offered to the company for similar debt instruments of comparable maturities. At August 2, 2015, the carrying value of the company’s long-term debt was $2.2 million and the fair value was $2.3 million.