(12) DEBT

The Company’s U.K. controls and capacitor subsidiaries each have multi-currency overdraft facilities which together total $1,200,000 and which are secured against real estate owned by those companies. In July 2016, the Company’s U.K. bank renewed these facilities for a twelve month period, although they can be withdrawn on demand by the bank. The facilities were unused at September 30, 2016 and 2015.

The Company entered into a €14,000,000 ($15,733,000 at September 30, 2016) credit facility with MPS Bank on January 27, 2016 and immediatedly drew down the full amount, which was the total amount outstanding at September 30, 2016. This amount is shown in the accompanying consolidated balance sheet under long-term debt. The carrying value of the debt approximated to fair value based on current interest rates. The loan and security agreement will expire on January 27, 2021 when all outstanding principal and unpaid interest will be due and payable in full. The facility may be paid before maturity in whole or in part at the option of the Company, on or after the six-month anniversary of the funding date, without penalty or premium. Interest on the loan is payable quarterly at a margin of 3% over EuroLIBOR, with a minimum EuroLIBOR rate of 0.0%. The interest rate as of September 30, 2016 was 3.0%. Under the facility, the Company must maintain a leverage ratio, defined as the ratio of consolidated indebtedness of the Company and its subsidiaries, minus cash and marketable securities, to EBITDA of the Company and its subsidiaries, measured on a fiscal year-end basis, plus (under a December 2016 amendment) the net cash proceeds received by the Company from the issuance and sale of equity securities during such twelve month period, of not greater than 3.5:1.00 through September 30, 2017, and thereafter not greater than 3.0:1.00.

The obligations under the credit facility are guaranteed by the Company’s U.S. subsidiaries, Sevcon USA, Inc. (“Sevcon USA”) and Sevcon Security Corporation (“Sevcon Security”) and are secured by (i) all of the assets of Sevcon USA, (ii) a pledge of all of the capital stock of Sevcon USA and Sevcon Security, (iii) a pledge of a promissory note in the principal amount of the loan delivered to the Company by the Company’s U.K. subsidiary, Sevcon Limited, and (iv) a pledge of 60% of the stock of each of Sevcon Limited and the Company’s French subsidiary, Sevcon SAS.

The Loan Agreement imposes customary limitations on the Company’s ability to, among other things, pay dividends, make distributions, dispose of certain assets other than the sale of inventory in the ordinary course, incur liens, incur additional indebtedness, make investments, issue preferred stock or other stock providing for the mandatory payment of dividends, and engage in transactions with affiliates.

Annual principal payments on long term bank debt converted to U.S. dollars at the September 30, 2016 exchange rate are as follows (in thousands of dollars):

2018	$	1,180
2019		1,573
2020		1,573
2021		11,407
		15,733
Less: Debt issuance costs		(221	)
Total	$	15,512