Note 6 – Debt

Credit Agreement

On March 17, 2016, the Company, together with certain direct and indirect subsidiaries, executed the Second Amendment to the Credit Agreement (the “Amended Credit Agreement”) with a consortium of lenders and Bank of America, N.A., as administrative agent.

The Amended Credit Agreement eliminated without penalty the U.S. Term and Europe Term Loans and increased the aggregate principal amount available for borrowing under the U.S. Revolving Note from $100,000 to $250,000. New subsidiary borrowers and guarantors were added under the Amended Credit Agreement and related pledge and security agreement. The security agreement grants a security interest in substantially all of the personal property of subsidiaries designated as borrowers to secure their respective obligations under the Amended 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). The Amended Credit Agreement restricts the amount of dividend payments the Company can make to shareholders.

Note 6 – Debt – Continued

The Amended Credit Agreement replaced the Company’s requirement to maintain a minimum Consolidated Fixed Charge Coverage Ratio with a minimum Consolidated Interest Coverage Ratio. The Company must also maintain a maximum Consolidated Leverage Ratio. Definitions for these financial ratios, and a description of modifications made to other covenants to which the Company and its subsidiaries are subject, are included in the Amended Credit Agreement.

Under the Amended Credit Agreement, U.S. Dollar denominated loans bear interest at either a base rate (“Base Rate”) or Eurocurrency rate (“Eurocurrency Rate”), plus a margin (“Applicable Rate”). The Base Rate is equal to the highest of the Federal Funds Rate (0.29% at September 30, 2016) plus 0.50%, Bank of America’s prime rate (3.50% at September 30, 2016), or a one month Eurocurrency rate (0.00% at September 30, 2016) plus 1.00%. The Eurocurrency Rate for loans denominated in U.S. Dollars is equal to the London Interbank Offered Rate (0.53% at September 30, 2016). All loans denominated in a currency other than the U.S. Dollar must be Eurocurrency Rate Loans. Interest is payable quarterly.

The Applicable Rate from the initial period of March 17, 2016 through the fiscal quarter ending September 30, 2016 is 1.50% per annum for Eurocurrency Rate Loans and 0.50% per annum for Base Rate Loans. After the initial period, the Applicable Rate will vary based on the Consolidated Leverage Ratio reported by the Company. As long as the Company is not in default of the terms and conditions of the Amended Credit Agreement, the lowest and highest possible Applicable Rate is 1.25% and 2.00%, respectively, for Eurocurrency Rate Loans and 0.25% and 1.00%, respectively, for Base Rate Loans.

The Company also has two fixed interest rate loans with the German Investment Corporation (“DEG”), a subsidiary of KfW Banking Group, a Germany government-owned development bank:

DEG China Loan

The first DEG loan, a loan we used to fund capital investments in China (the “DEG China Loan”), is subject to semi-annual principal payments beginning March, 2015 and ending September, 2019. Under the terms of the DEG China Loan, the Company must maintain a minimum Debt-to-Equity Ratio, Current Ratio and Debt Service Coverage Ratio, as defined by the DEG China Loan agreement, based on the financial statements of Gentherm’s wholly owned subsidiary, Gentherm Automotive Systems (China) Limited.

DEG Vietnam Loan

The Company’s second fixed interest rate loan agreement with DEG was used to finance the construction and set up of the Vietnam production facility (“DEG Vietnam Loan”). The DEG Vietnam Loan is subject to semi-annual principal payments beginning November, 2017 and ending May, 2023. Under the terms of the DEG Vietnam Loan, the Company must maintain a minimum Current Ratio, Equity Ratio and Enhanced Equity Ratio, as defined by the DEG Vietnam Loan agreement, based on the financial statements of Gentherm’s wholly owned subsidiary, Gentherm Vietnam Co. Ltd.

Note 6 – Debt – Continued

The following table summarizes the Company’s debt at September 30, 2016 and at December 31, 2015.

	September 30, 2016						December 31, 2015
	Interest Rate			Principal Balance			Principal Balance
Credit Agreement:
U.S. Term Loan				$	—		$	46,875
Europe Term Loan					—			20,369
Revolving Note (U.S. Dollar Denominations)		2.02	%		123,875			12,000
DEG China Loan		4.25	%		2,697			3,497
DEG Vietnam Loan		5.21	%		15,000			15,000
Total debt					141,572			97,741
Current portion					(899	)		(4,909	)
Long-term debt, less current maturities				$	140,673		$	92,832

The scheduled principal maturities of our debt as of September 30, 2016 are as follows:

Year	Revolving Note (U.S. Dollar)		DEG China Note		DEG Vietnam Note		Total
2016	$	—	$	—	$	—	$	—
2017		—		899		1,250		2,149
2018		—		899		2,500		3,399
2019		—		899		2,500		3,399
2020		—		—		2,500		2,500
2021		123,875		—		2,500		126,375
Thereafter		—		—		3,750		3,750
Total	$	123,875	$	2,697	$	15,000	$	141,572

Principal outstanding under the Revolving Note will be due and payable in full on March 17, 2021. As of September 30, 2016, we were in compliance with all terms as outlined in the Amended Credit Agreement, DEG China Loan and DEG Vietnam Loan.