Long-term Debt

Long-term debt was comprised of the following at February 28, 2017 and August 31, 2017:



	February 28, 2017			August 31, 2017
2014 Credit Agreement debt :
Revolver	$	—		$	5,000
Term Loan	152,245			74,421
Total 2014 Credit Agreement debt	152,245			79,421

98.7FM non-recourse debt	59,958			57,008
Other non-recourse debt ⁽¹⁾	8,807			9,868
Less: Current maturities	(23,600		)	(16,367		)
Less: Unamortized original issue discount	(7,038		)	(4,686		)
Total long-term debt	$	190,372		$	125,244

⁽¹⁾ The face value of other non-recourse debt was $9.5 million and $10.2 million at February 28, 2017 and August 31, 2017, respectively

2014 Credit Agreement

On June 10, 2014, Emmis entered into the 2014 Credit Agreement, by and among the Company, EOC, as borrower (the “Borrower”), certain other subsidiaries of the Company, as guarantors (the “Subsidiary Guarantors”), the lenders party thereto, JPMorgan Chase Bank, N.A., as administrative agent, and Fifth Third Bank, as syndication agent. Capitalized terms in this section not defined elsewhere in this 10-Q are defined in the 2014 Credit Agreement and related amendments.

The 2014 Credit Agreement includes a senior secured term loan facility (the “Term Loan”) of $185.0 million and a senior secured revolving credit facility of $20.0 million, and contains provisions for an uncommitted increase of up to $20.0 million principal amount (plus additional amounts so long as a pro forma total net senior secured leverage ratio condition is met) of the revolving credit facility and/or the Term Loan subject to the satisfaction of certain conditions. The revolving credit facility includes a sub-facility for the issuance of up to $5.0 million of letters of credit. Pursuant to the 2014 Credit Agreement, the Borrower borrowed $185.0 million of the Term Loan on June 10, 2014.

As a result of the Fourth Amendment to the 2014 Credit Agreement discussed below, the Term Loan is due not later than April 18, 2019 and the revolving credit facility expires on August 31, 2018. The Company no longer makes quarterly amortization payments related to the Term Loan as a result of repayments made in connection with the Company's sale of KPWR-FM. Subsequent to the Fourth Amendment to the 2014 Credit Agreement, 75 basis points per annum is payable quarterly on the average unused amount of the revolving credit facility. Prior to the amendments to the 2014 Credit Agreement discussed below, the Term Loan and amounts borrowed under the revolving credit facility bore interest, at the Borrower’s option, at either (i) the Alternate Base Rate (as defined in the 2014 Credit Agreement) (but not less than 2.00%) plus 3.75% or (ii) the Adjusted LIBO Rate (as defined in the 2014 Credit Agreement) (but not less than 1.00%) plus 4.75%.

The 2014 Credit Agreement is carried on our condensed consolidated balance sheets net of an original issue discount. The original issue discount, which was $5.1 million and $2.9 million as of February 28, 2017 and August 31, 2017, respectively, is being amortized as additional interest expense over the life of the 2014 Credit Agreement. In connection with the Term Loan repayment made during the three months ended August 31, 2017 as a result of the KPWR-FM sale, the Company wrote-off $2.5 million of the original issue discount which is recorded as loss on debt extinguishment in the accompanying condensed consolidated financial statements.

The obligations under the 2014 Credit Agreement are secured by a perfected first priority security interest in substantially all of the assets of the Company, the Borrower and the Subsidiary Guarantors.

On November 7, 2014, Emmis entered into the First Amendment to the 2014 Credit Agreement. The First Amendment (i) increased the maximum Total Leverage Ratio to 6.00:1.00 for the period February 28, 2015 through February 29, 2016, (ii) adjusted the definition of Consolidated EBITDA to exclude during the term of the 2014 Credit Agreement up to $5 million in severance and/or contract termination expenses and up to $2.5 million in losses attributable to the reformatting of the Company’s radio stations, (iii) extended the requirement for the Borrower to pay a 1.00% fee on certain prepayments of the Term Loan to November 7, 2015, (iv) increased the Applicable Margin by 0.25% for at least six months from the date of the First Amendment and until the Total Leverage Ratio is less than 5.00:1.00, and (v) made certain technical adjustments to the definition of Consolidated Excess Cash Flow and to address the Foreign Account Tax Compliance Act. Emmis paid a total of approximately $1.0 million of transaction fees to the Lenders that consented to the First Amendment, which were recorded as original issue discount and are being amortized over the remaining life of the 2014 Credit Agreement.

On April 30, 2015, Emmis entered into the Second Amendment to the 2014 Credit Agreement. The Second Amendment (i) increased the maximum Total Leverage Ratio to (A) 6.75:1.00 during the period from May 31, 2015 through February 29, 2016, (B) 6.50:1.00 for the quarter ended May 31, 2016, (C) 6.25:1.00 for the quarter ended August 31, 2016, (D) 6.00:1.00 for the quarter ended November 30, 2016, and (E) 5.75:1.00 for the quarter ended February 28, 2017, after which it reverted to the original ratio of 4.00:1.00 for the quarters ended May 31, 2017 and thereafter, (ii) required Emmis to pay a 2.00% fee on certain prepayments of the Term Loan prior to the first anniversary of the Second Amendment and required Emmis to pay a 1.00% fee on certain prepayments of the Term Loan from the first anniversary of the Second Amendment until the second anniversary of the Second Amendment, (iii) increased the Applicable Margin throughout the remainder of the term of the Credit Agreement to 5.00% for ABR Loans (as defined in the Credit Agreement) and 6.00% for Eurodollar Loans (as defined in the 2014 Credit Agreement), and (iv) increased the amortization to 0.50% per calendar quarter through January 1, 2016 and to 1.25% per calendar quarter thereafter commencing April 1, 2016. Emmis paid a total of approximately $1.1 million of transaction fees to the Lenders that consented to the Second Amendment, which were recorded as original issue discount and are being amortized over the remaining life of the 2014 Credit Agreement.

On August 22, 2016, Emmis entered into the Third Amendment to the 2014 Credit Agreement. The Third Amendment made certain changes to the Credit Agreement to facilitate the Company's consideration of and, if approved by the Company's Board of Directors and shareholders, entry into a transaction that would have resulted in the Class A common stock of the Company ceasing to be registered under the Securities Act of 1934 (such potential transaction, a "Going Private Transaction"). Specifically, the Third Amendment added an exception to the covenant restricting transactions with affiliates that (i) permitted the Company to enter into a Going Private Transaction with an affiliate of the Company and (ii) permitted the Borrower to pay any costs incurred or reimbursed by an affiliate of the Company in connection with a Going Private Transaction, whether or not the transaction was consummated. The Third Amendment also allowed the Company to add certain costs and expenses incurred in connection with a Going Private Transaction to Consolidated EBITDA, as defined in the Credit Agreement, for purposes of determining compliance with the financial covenants in the Credit Agreement, subject to caps of (i) $2.5 million if a Going Private Transaction was not recommended by a special committee of the Company’s Board of Directors and (ii) $8.0 million if a Going Private Transaction was recommended by a special committee of the Company’s Board of Directors but not consummated. Finally, the Third Amendment made certain changes to the Credit Agreement that would have been effective only if a Going Private Transaction was consummated. The Third Amendment also required the Borrower to pay a 50 basis point fee to the lenders that consented to it either if a Going Private Transaction was consummated or if such a transaction was recommended by a special committee of the board of directors of the Company but not consummated. The special committee of the board of directors did not recommend the Going Private Transaction and no such transaction was consummated.

On April 18, 2017, Emmis entered into a Fourth Amendment to our 2014 Credit Agreement. The Fourth Amendment (i) eliminated the maximum Total Leverage Ratio covenant through May 31, 2018 and replaced it with a minimum Consolidated EBITDA covenant, after which it reverts to a Total Leverage Ratio of 4.00:1.00 for the quarters ended August 31, 2018 and thereafter, (ii) reduced the Interest Coverage Ratio from 2.00:1.00 to 1.60:1.00, (iii) required Emmis to enter into definitive agreements by January 18, 2018 to sell assets that generate at least $80 million of sale proceeds and close such transactions no later than July 18, 2018, (iv) increased the Applicable Margin throughout the remainder of the term of the Credit Agreement to 6.00% for ABR Loans (as defined in the 2014 Credit Agreement) and 7.00% for Eurodollar Loans (as defined in the 2014 Credit Agreement) and increased the unused commitment fee on the revolving credit facility to 75 basis points, and (v) accelerated the maturity of the Term Loans to April 18, 2019 and the Revolving Loans to August 31, 2018. In addition to tightening or eliminating baskets and other credit enhancements for lenders, the Fourth Amendment contains ratcheting fees and premiums if the existing credit facility is not refinanced by July 18, 2018. The Fourth Amendment also required Emmis to pay a fee of 1.0% of the Term Loan holdings and Revolving Commitment of each Lender that consented to the Fourth Amendment. This fee totaled $1.5 million and was recorded as additional original issue discount and is being amortized as interest expense over the remaining life of the 2014 Credit Agreement, beginning in the three-month period ending May 31, 2017.

In connection with the closing of the sale of Texas Monthly on November 1, 2016, Emmis repaid $15.0 million of Term Loans and $8.5 million of Revolver borrowings. Under the terms of the 2014 Credit Agreement, Emmis was required to use all Net Available Proceeds (as defined in the 2014 Credit Agreement) from the sale of Texas Monthly to repay Term Loans unless it exercised its right under the 2014 Credit Agreement to reinvest a portion of the Net Available Proceeds in new long-term assets of the Company. On November 1, 2016, Emmis exercised this reinvestment right for up to $10.0 million of Net Available Proceeds. This election allows the Company to reduce the amount of Net Available Proceeds by amounts used to purchase assets within 365 days of the election, or 545 days of the election so long as the asset purchase is under contract within 365 days. Routine capital expenditures qualify as a reinvestment under the terms of the 2014 Credit Agreement. Future changes in these estimates will impact the calculation of Net Available Proceeds. The current calculation of Net Available Proceeds, reinvestments and Term Loan repayments related to the sale of Texas Monthly is as follows:



	Term Loan Repayments Texas Monthly Sale
Gross proceeds from the sale of Texas Monthly	$	25,000
Working capital and other closing adjustments	(747		)
Transaction costs, including severance	(1,378		)
Subtotal	22,875
Less: Reinvestments (estimated)	(3,475		)
Less: Term Loan repayment on November 1, 2016	(15,000		)
Remaining Net Available Proceeds, subject to finalization of reinvestments	$	4,400

The current estimate of $4.4 million of remaining net available proceeds is included as a current maturity of long-term debt in the accompanying condensed consolidated balance sheets as of August 31, 2017. The amount is not yet final as reinvestments are estimated and could change prior to the conclusion of the reinvestment period as described above.

We were in compliance with all financial and non-financial covenants as of August 31, 2017. Our Minimum Consolidated EBITDA and Interest Coverage Ratio (each as defined in the 2014 Credit Agreement and related amendments) requirements and actual amounts as of August 31, 2017 were as follows:



	As of August 31, 2017
	Covenant Requirement			Actual Results
Minimum Consolidated EBITDA	$	13.6	million	$	17.5	million
Minimum Interest Coverage Ratio	1.60 : 1.00			2.59 : 1.00

98.7FM Non-recourse Debt

On May 30, 2012, the Company, through wholly-owned, newly-created subsidiaries, issued $82.2 million of non-recourse notes. Teachers Insurance and Annuity Association of America, through a participation agreement with Wells Fargo Bank Northwest, National Association, is entitled to receive payments made on the notes. The notes are obligations only of the newly-created subsidiaries, are non-recourse to the rest of the Company and its subsidiaries, and are secured by the assets of the newly-created subsidiaries, including the payments made to the newly-created subsidiary related to the 98.7FM LMA, which are guaranteed by Disney Enterprises, Inc. The notes bear interest at 4.1%. The 98.7FM non-recourse notes are carried on our condensed consolidated balance sheets net of an original issue discount. The original issue discount, which was $2.0 million and $1.8 million as of February 28, 2017 and August 31, 2017, respectively, is being amortized as additional interest expense over the life of the notes.

Other Non-recourse Debt

Digonex non-recourse notes payable consist of notes payable issued by Digonex, which were recorded at fair value on June 16, 2014, the date that Emmis acquired a controlling interest in Digonex. The notes payable, some of which are secured by the assets of Digonex, are non-recourse to the rest of the Company and its subsidiaries. During the quarter ended August 31, 2017, Digonex noteholders agreed to extend the maturity date of the notes from December 31, 2017 to December 31, 2020. The notes accrue interest at 5.0% per annum with interest due at maturity. The face value of the notes payable is $6.2 million. The Company is accreting the difference between this face value and the original $3.6 million fair value of the notes payable recorded in the acquisition of its controlling interest of the business as interest expense over the remaining term of the notes payable.

During the quarter ended May 31, 2017, NextRadio, LLC issued $0.7 million of notes payable, bringing the cumulative total of notes payable issued by NextRadio, LLC to $4.0 million. The notes initially bear interest at 4.0% with interest due quarterly beginning in August 2018. The notes mature on December 23, 2021 and are to be repaid through revenues generated by enhanced advertisement revenues earned by NextRadio, LLC. If any portion of the notes remain unpaid at maturity, the lender has the option to exchange the notes for senior preferred equity of NextRadio, LLC's parent entity, TagStation, LLC. These notes are obligations of NextRadio, LLC and TagStation, LLC and are non-recourse to the rest of Emmis' subsidiaries.

Based on amounts outstanding at August 31, 2017, mandatory principal payments of long-term debt for the next five years and thereafter are summarized below:



	2014 Credit Agreement				98.7FM Non-recourse		Other Non-recourse
Year ended February 28 (29),	Revolver		Term Loan		Debt		Debt		Total Payments
Remainder of 2018	$	—	$	4,400	$	3,089	$	—	$	7,489
2019	5,000		—		6,587		—		11,587
2020	—		70,021		7,150		—		77,171
2021	—		—		7,755		6,239		13,994
2022	—		—		8,394		4,000		12,394
Thereafter	—		—		24,033		—		24,033
Total	$	5,000	$	74,421	$	57,008	$	10,239	$	146,668