DEBT OBLIGATIONS

Debt obligations consisted of the following (in thousands):



	December 31,			December 31,
	2017			2016
Unsubordinated term loan	$	70,568		$	85,636
Revolving credit facility	245,000			355,000
Aircraft loans	3,640			18,085
Convertible debt	196,550			—
Total debt obligations	515,758			458,721
Less: current portion	(18,512		)	(29,306		)
Total long term obligations, net	$	497,246		$	429,415

The Company executed a syndicated credit agreement ("Senior Credit Agreement") in May 2011 which includes an unsubordinated term loan and a revolving credit facility. Effective March 31, 2017, the Company executed an amendment to the Senior Credit Agreement that extended the maturity of the term loan and revolving credit facility to May 30, 2022, increased the capacity of the revolving credit facility by $120.0 million to $545.0 million and preserved the accordion feature such that the Company can now draw up to an additional $100.0 million subject to the lenders' consent. Each year, through May 6, 2019, the Company may request a one year extension of the final maturity date, subject to the lenders' consent. In September 2017, the Company executed amendments to the Senior Credit Agreement. These amendments increased the revolving credit facility's permitted additional indebtedness to $300.0 million for convertible notes described below. The amendments also increased the amount of dividends the Company can pay and the amount of common stock it can repurchase to $100.0 million during any calender year, provided the Company's total secured debt to earnings before interest, taxes, depreciation and amortization expenses ("EBITDA") ratio is under 3.00 times, after giving effect to the dividend or repurchase. As of December 31, 2017, the unused revolving credit facility totaled $290.7 million, net of draws of $245.0 million and outstanding letters of credit of $9.3 million.

The Senior Credit Agreement is collateralized by certain of the Company's Boeing 767 and 757 aircraft that are not collateralized under aircraft loans. Under the terms of the Senior Credit Agreement, the Company is required to maintain collateral coverage equal to 125% of the outstanding balance of the term loan and the maximum capacity of revolving credit facility or 150% of the outstanding balance of the term loan and the total funded revolving credit facility, whichever is less. The minimum collateral coverage which must be maintained is 50% of the outstanding balance of the term loan plus the revolving credit facility commitment which was $545.0 million.

The balance of the unsubordinated term loan is net of debt issuance costs of $0.7 million and $0.6 million for the years ended December 31, 2017 and 2016, respectively. Under the terms of the Senior Credit Agreement, interest rates are adjusted quarterly based on the Company's EBITDA, its outstanding debt level and prevailing LIBOR or prime rates. At the Company's current debt-to-EBITDA ratio, the LIBOR based financing for the unsubordinated term loan and revolving credit facility bear a variable interest rate of 3.07% and 3.07%, respectively. The aircraft loan is collateralized by one aircraft, and amortizes monthly with a balloon payment of approximately 20% with a maturity in early 2018. The interest rates on the aircraft loan is 6.74% per annum payable monthly. The aircraft loan was paid off by the Company in January 2018.

The Senior Credit Agreement contains covenants including, among other things, limitations on certain additional indebtedness, guarantees of indebtedness, as well as a total debt to EBITDA ratio and a fixed charge coverage ratio. The Senior Credit Agreement stipulates events of default, including unspecified events that may have material adverse effects on the Company. If an event of default occurs, the Company may be forced to repay, renegotiate or replace the Senior Credit Agreement.

In September 2017, the Company issued $258.8 million aggregate principal amount of 1.125% Convertible Senior Notes due 2024 ("Notes") in a private offering to qualified institutional buyers pursuant to Rule 144A under the Securities Act. The Notes bear interest at a rate of 1.125% per year payable semi-annually in arrears on April 15 and October 15 each year, beginning April 15, 2018. The Notes mature on October 15, 2024, unless repurchased or converted in accordance with their terms prior to such date. The Notes are unsecured indebtedness, subordinated to the Company's existing and future secured indebtedness and other liabilities, including trade payables. Conversion of the Notes can only occur upon satisfaction of certain conditions and during certain periods, beginning any calendar quarter commencing after December 31, 2017 and thereafter, until the close of business on the second scheduled trading day immediately preceding the maturity date. Upon the occurrence of certain fundamental changes, holders of the Notes can require the Company to repurchase their notes at the cash repurchase price equal to the principal amount of the notes, plus any accrued and unpaid interest. Until the Company's shareholders increase the number of authorized shares of common stock to cover the full number of shares underlying the Notes, the Company is required to settle conversions solely in cash. If the number of authorized shares is increased, the Notes may be settled in cash, the Company’s common shares or a combination of cash and the Company’s common shares, at the Company’s election. The initial conversion rate is 31.3475 common shares per $1,000 principal amount of Notes (equivalent to an initial conversion price of approximately $31.90 per common share). If a “make-whole fundamental change” (as defined in the offering circular with the Notes) occurs, the Company will, in certain circumstances, increase the conversion rate for a specified period of time.

The Company evaluated the conversion features of the Notes under the applicable accounting guidance including ASC 815, "Derivatives and Hedging," and determined that the conversion features require separate accounting as a derivative. At the time of issuance, the fair value of this derivative was recorded on the balance sheet as the note conversion obligations (a long-term liability) and an offsetting discount to the Notes. Until the Company's shareholders increase the number of authorized shares of common stock, the note conversion obligations will be adjusted to reflect its fair value at the end of each quarter. The fair value of the note conversion obligation at issuance was $57.4 million. The fair value of the note conversion obligations at December 31, 2017 was $54.4 million and resulted in a non-operating gain of $3.0 million before the effect of income tax during 2017.

The net proceeds from the issuance of the Notes were approximately $252.3 million, after deducting initial issuance costs. These unamortized issuance costs and discount are being amortized to interest expense through October 2024, using an effective interest rate of approximately 5.15%. The carrying value of the Company's Convertible debt is shown below.



	December 31,
	2017
Principal value, Convertible Senior Notes, due 2024	258,750
Unamortized issuance costs	(6,685	)
Unamortized discount	(55,515	)
Convertible debt	196,550

In conjunction with the offering of the Notes, the Company purchased convertible note hedges under privately negotiated transactions for $56.1 million. These transactions cover, subject to customary anti-dilution adjustments, the number of the Company’s common shares that initially underlie the Notes, and are expected to reduce the potential equity dilution with respect to our common stock, and/or offset any cash payments in excess of the principal amount due, as the case may be, upon conversion of the Notes. The initial strike price of the convertible note hedges is $31.90 per share. The Company evaluated the convertible note hedges under the applicable accounting guidance, including ASC 815, "Derivatives and Hedging," and determined that the convertible note hedges should be accounted for as derivatives. These derivatives were capitalized on the balance sheet as long-term assets and are adjusted to reflect their fair value at the end of the quarter. The fair value of the convertible note hedges at December 31, 2017 was $53.7 million. As of December 31, 2017, the re-measurement of the convertible note hedges to fair value resulted in a non-operating loss of $2.4 million before the effect of income tax.

In conjunction with the offering of the Notes, the Company also sold warrants to the convertible note hedge counterparties in separate, privately negotiated warrant transactions at a higher strike price and for the same number of the Company’s common shares, subject to customary anti-dilution adjustments. The warrants could have a dilutive effect on the Company’s outstanding common shares and the Company’s earnings per share to the extent that the traded market price of the Company’s common shares exceeds the strike price of the warrants which is $41.35 per share and is subject to certain adjustments under the terms of the warrant transactions. The Company evaluated the warrants under the applicable accounting guidance, including ASC 815 "Derivatives and Hedging," and determined that the warrants meet the definition of a derivative. However, because these warrants have been determined to be indexed to the Company's own stock and meet the criteria for equity classification, they have been recorded in shareholder's equity. In the event these warrants are exercised, the Company has enough authorized and unissued shares for their issuance. The amount paid for these warrants and recorded in Stockholders' Equity in the Company’s consolidated balance sheets was $38.5 million. Taken together, the convertible note hedge and warrant transactions are intended to limit, during Notes conversion events, the dilution of the Company's common shares until the traded market price exceeds $41.35.

The scheduled cash principal payments for the Company's debt obligations, as of December 31, 2017, for the next five years are as follows (in thousands):



	Principal Payments
2018	$	18,640
2019	15,000
2020	15,000
2021	15,000
2022	256,250
2023 and beyond	258,750
Total principal cash payments	578,640
Less: unamortized issuance costs and discounts	(62,882		)
Total debt obligations	$	515,758