Note 6 – Debt

Credit Agreement

On August 7, 2014, the Company, together with certain direct and indirect subsidiaries, entered into a new Credit Agreement (the “Credit Agreement”) with a syndicate of banks led by Bank of America.

The Credit Agreement provides for a $50,000 secured term loan facility for Gentherm (the “US Term Loan”), a €20,000 secured term loan facility for Gentherm GmbH (the “Europe Term Loan”), and a $100,000 secured revolving credit facility (with specific borrowing limits for foreign subsidiaries party to such agreement). The Credit Agreement allows the Company to increase the revolving credit facility or incur additional secured term loans in an aggregate amount of $50,000.

All obligations under the Credit Agreement (including all the obligations of any US or non-US loan party) are unconditionally guaranteed by Gentherm and specified US subsidiaries. Additionally, such parties entered into a pledge and security agreement, granting security interest in substantially all of their personal property to secure their respective obligations under the Credit Agreement, including the stock and membership interests of specified subsidiaries (limited to 66% of the stock in the case of certain non-US subsidiaries). Further, specified foreign subsidiaries guarantee all obligations of the non-US loan parties under the Credit Agreement.

The following amounts were borrowed under the credit agreement:



Borrowing proceeds on August 7, 2014	Currency Borrowed		US Dollars
US Term Loan	$	50,000	$	50,000
US Revolving Note	C$	15,000		13,695
Europe Term Loan	€	20,000		26,730

On August 7, 2014, all amounts owed under the existing US Term Note, US Revolving Note, Europe Term Note and W.E.T. Term Note (collectively, the “Old Credit Agreements”) were repaid without penalty. The Old Credit Agreements and related security and pledge agreements were terminated as of such date. Unamortized capitalized financing costs totaling $730 related to the Old Credit Agreements were expensed to debt retirement expense in the three months ended September 30, 2014.

The Company incurred expenses associated with the Credit Agreement which have been recorded as deferred financing costs and will be amortized over the life of the Credit Agreement using the effective interest method. The US Term Loan, Europe Term Loan and US Revolving Note mature on August 7, 2019.

Note 6 – Debt – Continued

Under the Credit Agreement, U.S. Dollar denominated loans bear interest at either a base rate (“Base Rate Loans”) or Eurocurrency rate (“Eurocurrency Rate Loans”), plus a margin (“Applicable Rate”). Base Rate Loans are equal to the highest of the Federal Funds Rate (0.07% at September 30, 2014) plus 0.50%, Bank of America’s prime rate (3.25% as of September 30, 2014), or a one month Eurocurrency rate plus 1.00%. Eurocurrency Rate Loans denominated in US Dollars or European Euros (“Euros”) are equal to the London Interbank Offered Rate and the Canadian Dealer Offered Rate for Canadian Dollar denominations. All loans denominated in a currency other than the US Dollar, including the Europe Term Loan, must be Eurocurrency Rate Loans. Interest is payable at least quarterly.

The Applicable Rate from the initial period of August 7, 2014 through the fiscal quarter ending December 31, 2014 is 1.75% per annum for Eurocurrency Rate Loans and 0.75% for Base Rate Loans. After the initial period, the Applicable Rate will vary based on the Consolidated Leverage Ratio of the Company, as defined by the Credit Agreement. As long as the Company is not in default of the terms and conditions of the Credit Agreement, the lowest and highest possible Applicable Rate is 1.50% and 2.00%, respectively, for Eurocurrency Rate Loans and 0.50% and 1.00%, respectively, for Base Rate Loans.

The Company must maintain certain financial ratios consisting of a minimum Consolidated Fixed Charge Coverage Ratio and a maximum Consolidated Leverage Ratio as defined by the Credit Agreement.

DEG Loan

The Company has a fixed interest rate loan with the German Investment Corporation, a subsidiary of KfW banking group, a German government-owned development bank (“DEG Loan”). The DEG Loan is subject to semi-annual principal payments beginning March, 2015 and ending September, 2019. Under the terms of the DEG Loan, the Company must maintain a minimum Debt-to-Equity Ratio, Current Ratio and Debt Service Coverage Ratio based on the financial statements of Gentherm’s wholly owned subsidiary, Gentherm Automotive Systems (China) Limited, as defined by the DEG Loan agreement.

Capital Lease

The Company has a capital lease agreement for an enterprise resource planning system. 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.

The following table summarizes the Company’s debt at September 30, 2014 and at December 31, 2013.

	September 30, 2014						December 31, 2013
	Interest Rate			Principal Balance			Principal Balance
Credit Agreement:
US Term Loan		1.98	%	$	50,000		$	—
Europe Term Loan		1.81	%		25,267			—
US Revolving Note		3.00	%		13,419			—
Prior Credit Agreements:
US Term Note					—			24,500
Europe Term Note					—			38,899
W.E.T. Term Note					—			10,920
DEG Loan		4.25	%		5,053			5,561
Capital leases		4.20	%		1,053			2,440
Total debt					94,792			82,320
Current portion					(4,816	)		(21,439	)
Long-term debt, less current maturities				$	89,976		$	60,881

Note 6 – Debt – Continued

The scheduled principal maturities of our debt as of September 30, 2014 is as follows:

Year	US Term Loan		Europe Term Loan		U.S. Revolving Note		DEG Loan		Capital Leases		Total
2014	$	625	$	316	$	—	$	—	$	395	$	1,336
2015		2,500		1,263		—		1,011		658		5,432
2016		2,812		1,421		—		1,011		—		5,244
2017		3,750		1,895		—		1,011		—		6,656
2018		4,063		2,053		—		1,011		—		7,127
2019		36,250		18,319		13,419		1,009		—		68,997
Total	$	50,000	$	25,267	$	13,419	$	5,053	$	1,053	$	94,792

Principal outstanding under the US Term Loan, the Europe Term Loan and the US Revolving Note will be due and payable in full on August 7, 2019. As of September 30, 2014, we were in compliance with all terms as outlined in the Credit Agreement, the DEG Loan and the capital lease agreement.