14. Long-Term Debt and Credit Arrangements

(in thousands)	September 30, 2018			December 31, 2017			September 30, 2017
Senior notes payable	$	80,000		$	80,000		$	120,000
Credit Agreement term loan		148,125			90,000			91,250
Credit Agreement revolving credit loan		137,000			55,000			30,000
Convertible notes		69,659			—			—
Debt issuance costs		(1,062	)		(499	)		(532	)
Total debt		433,722			224,501			240,718
Less current maturities		116,796			46,048			14,796
Total long-term debt	$	316,926		$	178,453		$	225,922

The aggregate minimum principal maturities of long-term debt, including current maturities and excluding debt issuance costs, related to balances at September 30, 2018 are as follows: $111.4 million during the remainder of 2018; $47.5 million in 2019; $7.5 million in 2020; $7.5 million in 2021; $7.5 million in 2022; and $253.3 million thereafter.

Senior Notes Payable

Senior notes payable in the amount of $80.0 million as of both September 30, 2018 and December 31, 2017 and in the amount of $120.0 million as of September 30, 2017 were due to a group of institutional holders and had an interest rate of 6.11% per annum (“2019 Notes”). As of both September 30, 2018 and December 31, 2017, $40.0 million of the outstanding balance was included in long-term debt and the remaining $40.0 million was included in current maturities of long-term debt on the condensed consolidated balance sheets. As of September 30, 2017, $10.0 million of the outstanding balance was included in current maturities of long-term debt in the condensed consolidated balance sheets. The remaining $110.0 million was included in long-term debt in the condensed consolidated balance sheets, including $30.0 million due for the 2017 installment as we had the ability and intent to pay the 2017 installment using borrowings under the Credit Agreement or by obtaining other sources of financing.

Credit Agreement

Granite entered into the Third Amended and Restated Credit Agreement dated May 31, 2018 (the “Credit Agreement”). The Credit Agreement provides for, among other things, (i) an increase in the total committed credit facility amount to $500.0 million from $300.0 million, of which $148.1 million is a term loan (all of which was drawn on May 31, 2018) and of which $350.0 million is a revolving credit facility; (ii) an additional increase to the revolving credit facility and/or term loan at the option of the Company, in an aggregate maximum amount up to $200.0 million subject to the lenders providing the additional commitments; (iii) a revised maturity date of May 31, 2023 (the “Maturity Date”) and (iv) the elimination of the stipulation to have a $150 million minimum cash balance before and after a dividend payment. There was no change in the aggregate sublimit for letters of credit of $100.0 million nor was there any significant change to the affirmative, restrictive or financial covenant terms except for the removal of the minimum Consolidated Tangible Net Worth financial covenant requirement and an increase of the Consolidated Leverage Ratio financial covenant requirement from 3.00 to 3.50 for the four quarters subsequent to a permitted acquisition with cash consideration in excess of $100.0 million.

Of the $148.1 million term loan, 1.25% of the principal balance is due each quarter beginning in December 2018 and the remaining balance is due on the Maturity Date. As of September 30, 2018, December 31, 2017 and September 30, 2017, $7.5 million, $6.2 million and $5.0 million, respectively, of the term loan balance was included in current maturities of long-term debt and the remaining $140.6 million, $83.8 million and $86.3 million, respectively, was included in long-term debt on the condensed consolidated balance sheets.

As of September 30, 2018, the total stated amount of all issued and outstanding letters of credit under the Credit Agreement was $30.6 million. As of September 30, 2018, December 31, 2017 and September 30, 2017, $137.0 million, $55.0 million and $30.0 million had been drawn on the revolving credit facility primarily to fund the Layne and LiquiForce acquisitions and to service the 2016 and 2017 installments of the 2019 Notes, respectively. As of September 30, 2018, the total unused availability under the Credit Agreement was $182.4 million. The letters of credit will expire between October 2018 and August 2019.

Borrowings under the Credit Agreement bear interest at LIBOR or a base rate (at our option), plus an applicable margin based on the Consolidated Leverage Ratio calculated quarterly. LIBOR varies based on the applicable loan term, market conditions and other external factors. The applicable margin was 1.50% for loans bearing interest based on LIBOR and 1.50% for loans bearing interest at the base rate at September 30, 2018. Accordingly, the effective interest rate using three-month LIBOR and base rate was 3.90% and 5.75%, respectively, at September 30, 2018 and we elected to use LIBOR for both the term loan and the revolving credit facility. In May 2018, we entered into an interest rate swap to convert the interest rate on borrowings under the Credit Agreement from a variable interest rate of LIBOR plus an applicable margin to a fixed rate of 2.76% plus the same applicable margin.

Borrowings at the base rate have no designated term and may be repaid without penalty any time prior to the Maturity Date. Borrowings bearing interest at a LIBOR rate have a term no less than one month and no greater than six months (a longer period, not to exceed 12 months, if approved by all lenders). At the end of each term, such borrowings can be paid or continued at our discretion as either a borrowing at the base rate or a borrowing at a LIBOR rate with similar terms and the same or different permitted interest period. Our obligations under the Credit Agreement are guaranteed by certain of our subsidiaries and are collateralized on an equivalent basis with the obligations under the 2019 Notes by first priority liens (subject only to other permitted liens) on substantially all of the assets of the Company and certain of our subsidiaries that are required to be guarantors or borrowers under the Credit Agreement.

The Credit Agreement provides for the release of the liens securing the obligations at our option and expense, so long as certain conditions as defined by the terms in the Credit Agreement are satisfied (“Collateral Release Period”). However, if subsequent to exercising the option, our Consolidated Fixed Charge Coverage Ratio is less than 1.25 or our Consolidated Leverage Ratio is greater than 2.50, then we would be required to promptly re-pledge substantially all of the assets of the Company and our subsidiaries that are guarantors or borrowers under the Credit Agreement. As of September 30, 2018, the conditions for the exercise of our right under Credit Agreement to have liens released were not satisfied.

Convertible Notes

In connection with our acquisition of Layne, we assumed fair value of $69.9 million of convertible notes that have an interest rate of 4.25% per annum, payable semi-annually in arrears on May 15 and November 15 (“4.25% Convertible Notes”). The 4.25% Convertible Notes mature on November 15, 2018, unless earlier repurchased, redeemed or converted and are convertible at the option of the holders until the close of business on November 14, 2018. As of September 30, 2018, $69.9 million was included in current maturities of long-term debt on the condensed consolidated balance sheets.

Subsequent to the Merger Agreement, cash was elected as the settlement method for conversion of the 4.25% Convertible Notes. As of September 30, 2018, the conversion rate was 11.8360 shares of Granite’s common stock per $1,000 in principal of the 4.25% Convertible Notes providing a conversion price of approximately $84.49 per share of Granite’s common stock.

Also in connection with our acquisition of Layne, we assumed fair value of $121.6 million of convertible notes that have an interest rate of 8.0% per annum, payable semi-annually on May 1 and November 1 (“8.0% Convertible Notes”). As of September 30, 2018, $30.7 million associated with the conversion feature was included in additional paid-in capital on the condensed consolidated balance sheet. The 8.0% Convertible Notes had a maturity date of August 15, 2018 (Maturity Date). During the three months ended September 30, 2018, $52.0 million of convertible notes were converted to 1.2 million shares of Granite common stock at the election of the note holders. The remaining $38.9 million, as well as $0.9 million of accrued interest as of the maturity date, was redeemed in cash.

Covenants and Events of Default

Our debt and credit agreements require us to comply with various affirmative, restrictive and financial covenants, including the financial covenants described below. Our failure to comply with any of these covenants, or to pay principal, interest or other amounts when due thereunder, would constitute an event of default under the applicable agreements. Under certain circumstances, the occurrence of an event of default under one of our debt or credit agreements (or the acceleration of the maturity of the indebtedness under one of our agreements) may constitute an event of default under one or more of our other debt or credit agreements. Default under our debt and credit agreements could result in (i) us no longer being entitled to borrow under the agreements; (ii) termination of the agreements; (iii) the requirement that any letters of credit under the agreements be cash collateralized; (iv) acceleration of the maturity of outstanding indebtedness under the agreements and/or (v) foreclosure on any collateral securing the obligations under the agreements.

The most significant financial covenants under the terms of our Credit Agreement and related to the note purchase agreement governing our 2019 Notes (“2019 NPA”) require the maintenance of a minimum Consolidated Interest Coverage Ratio and a maximum Consolidated Leverage Ratio. In addition, the 2019 NPA requires a minimum Consolidated Tangible Net Worth.

As of September 30, 2018 and pursuant to the definitions in the 2019 NPA, which is more restrictive, our Consolidated Tangible Net Worth was $1.1 billion, which exceeded the minimum of $786.5 million, our Consolidated Leverage Ratio was 1.74 which did not exceed the maximum of 3.00. Our Consolidated Interest Coverage Ratio was 18.83 which exceeded the minimum of 4.00.

As of September 30, 2018, we were in compliance with all covenants contained in the Credit Agreement and related to the 2019 NPA. We are not aware of any non-compliance by any of our unconsolidated real estate entities with the covenants contained in their debt agreements.