Note 6 – Debt

Gentherm, Inc. and our subsidiary, Gentherm Europe, have entered into a credit agreement with a syndicate of banks led by Bank of America (the “US Bank of America credit facility”). W.E.T., a subsidiary of Gentherm Europe, has also entered into a credit facility with the same syndicate of banks (the “W.E.T. Bank of America credit facility”).

The US Bank of America credit facility provided two term notes (referred to as the “US Term Note and Europe Term Note”) and a revolving line of credit note (“US Revolving Note”). The W.E.T. Bank of America credit facility provided W.E.T. with a term note (“W.E.T. Term Note”) and a revolving line of credit note (“W.E.T. Revolving Note”).

The US Term Note and Europe Term Note are subject to quarterly principal payments, with total principal amortization of 10% of the original principal amount in the first year and amortization of 12.5%, 15%, 17.5% and 10% of the original principal amount during years two, three, four and five, respectively with all remaining amounts owing under each term facility due and payable in full at the term loan maturity date. The W.E.T. Term Note is subject to quarterly principal payments totaling 20% annually. Principal outstanding under the two credit facilities will be due and payable in full on March 30, 2016. Interest is payable at least quarterly. The Company has the option to elect interest rates based on either a Eurocurrency (LIBOR or EURIBOR) rate (“Eurocurrency Rate Loans”) (0.20% – 0.40% at June 30, 2013) or a base rate (“Base Rate Loans”) plus a margin (“Applicable Rate”), which varies based on the Consolidated Leverage Ratio of the Company, as defined by the US and W.E.T. Bank of America credit agreements. The base rate is equal to the highest of the Federal Funds Rate (0.07% at June 30, 2013) plus 0.5%, Bank of America’s prime rate (3.25% at June 30, 2013), or a one month Eurocurrency rate plus 1.0%. The Applicable Rate for the current period was 2.25% for Eurocurrency Rate Loans and 1.25% for Base Rate Loans. The Company must maintain a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Leverage Ratio, as defined by the Bank of America credit agreement. The loans are secured by all of the Company’s assets.

In February 2013, the Company made a $40,441 draw on the existing Europe Term Note portion of the US Bank of America credit facility to finance the purchase of shares of WET held by non-controlling interests. The Europe Term Note is now closed and additional draws are not available to Gentherm.

Note 6 – Debt – Continued

We have also borrowed CN¥20,000, or $3,159, from Bank of China to fund a plant expansion project in China. The Bank of China loan is due in lump sum on September 10, 2013 with interest calculated at a fixed rate of 6.9%.

In May 2013, the Company made an initial draw of €2,000, or $2,601, on a loan from the German Investment Corporation, a subsidiary of KfW banking group, a German government-owned development bank (“DEG Loan”), to fund the China plant expansion project. The loan will repay the Bank of China short term financing used to complete the project. The initial draw has an interest rate of 3% over a calculated EURIBOR rate of 0.231%. An additional €2,000 draw will be made in the 3rd quarter of 2013. In September 2013, the entire outstanding balance will be rolled into a fixed interest rate loan with an interest rate of 3% plus the Euro Swap Rate, as defined by the credit agreement. The Euro Swap Rate at the end of June was approximately 1.05%. The DEG Loan will be subject to semi-annual principal payments beginning March, 2015 and ending September, 2019. Under the terms of the loan, the Company must maintain a minimum Debt-to-Equity Ratio, Current Ratio and Debt Service Coverage Ratio based on the financial statements of W.E.T. Automotive Systems (China) Limited, as defined by the DEG Loan agreement.

The Company’s capital lease agreement for an enterprise resource planning system ended in May. A new lease agreement an enterprise resource planning system commenced in June and will end May, 2015. Under the terms of the lease, the Company must maintain certain financial covenants. Ownership of the system will be transferred to the Company at the end of the agreement.

No amounts were outstanding under either the US Revolving Note or the W.E.T. Revolving Note as of June 30, 2013 and $29,550 and €20,000 were available under each note, respectively. Gentherm has an outstanding Letter of Credit of $450 as of June 30, 2013.

The following table summarizes the Company’s debt at June 30, 2013 and at December 31, 2012.

	June 30, 2013						December 31, 2012
	Interest Rate			Principal Balance			Principal Balance
US Term Note		2.53	%	$	27,125		$	29,312
Europe Term Note		2.51	%		42,036			4,476
W.E.T. Term Note		2.00	%		14,710			18,852
Bank of China		6.90	%		3,240			3,172
DEG Loan		3.23	%		2,601			—
Capital Leases		4.20	%		3,116			1,140
Total debt					92,828			56,952
Current portion					(22,598	)		(17,218	)
Long-term debt, less current maturities				$	70,230		$	39,734

As of June 30, 2013, we were in compliance with all terms as outlined in the credit agreement for each of the US Bank of America credit facility, the W.E.T. Bank of America credit facility, the Bank of China loan, DEG loan and the capital lease agreement.