(16) Borrowings

Short-term Bank Loans

The Company’s international securities clearing and settlement activities are funded with operating cash or with short-term bank loans in the form of overdraft facilities. At December 31, 2018, there was $78.0 million outstanding under these facilities at a weighted average interest rate of approximately 1.92% primarily associated with international settlement activities.

In the U.S., securities clearing and settlement activities are funded with operating cash, securities loaned or with short-term bank loans under the 2018 Credit Agreement described below.

ITG Inc., as borrower, and Investment Technology Group, Inc. (the “Parent Company”), as guarantor, maintain a $150 million revolving credit agreement (the “2018 Credit Agreement”) with a syndicate of banks and JPMorgan Chase Bank, N.A., as Administrative Agent that was originally scheduled to mature in January 2019. On January 25, 2019, the 2018 Credit Agreement was amended to extend the maturity date to expire on March 31, 2019 to maintain financing availability under the 2018 Credit Agreement until the closing of the acquisition of the Company by Virtu. The 2018 Credit Agreement was terminated at the Effective Time of the Merger. The purpose of this credit line was to provide liquidity for the Company’s U.S. brokerage operations to satisfy clearing margin requirements and to finance temporary positions from delivery failures or non-standard settlements. As a result, the Parent Company had additional flexibility with its existing cash and future cash flows from operations, including to selectively invest in growth initiatives and to return capital to stockholders. Depending on the borrowing base, availability under the 2018 Credit Agreement was limited to either (i) a percentage of the clearing deposit required by the National Securities Clearing Corporation, or (ii) a percentage of the market value of temporary positions pledged as collateral. Under the 2018 Credit Agreement, interest accrued at a rate equal to (a) a base rate, determined by reference to the federal funds rate plus (b) a margin of 2.50%. Available but unborrowed amounts under the 2018 Credit Agreement were subject to an unused commitment fee of 0.75%. Among other restrictions, the terms of the 2018 Credit Agreement included (a) negative covenants related to liens, (b) financial covenant requirements for maintaining a consolidated leverage ratio (as defined) and a liquidity ratio (as defined), as well as requirements for maintaining minimum levels of tangible net worth (as defined) and regulatory capital (as defined), and (c) restrictions on investments, dispositions and other restrictions customary for financings of this type.

The events of default under the 2018 Credit Agreement included, among others, payment defaults, cross defaults with certain other indebtedness, breaches of covenants, loss of collateral, judgments, and changes in control and bankruptcy events. In the event of non-payment, the 2018 Credit Agreement required ITG Inc. to pay incremental interest at the rate of 2.0%. In the event of a default and depending on the nature thereof, the commitments either automatically terminated and all unpaid amounts immediately became due and payable, or the lenders may in their discretion have terminated their commitments and declared due all unpaid amounts outstanding.

At December 31, 2018, there was $1.2 million outstanding under the 2018 Credit Agreement.

Term Debt

At December 31, term debt is comprised of the following (dollars in thousands):


	December 31,		December 31,
	2018		2017
Term loans	$	1,967	$	3,104
Total	$	1,967	$	3,104

On December 21, 2017, the Company entered into a three year, $0.7 million note and security agreement with Hewlett-Packard Financial Services (“H-P Veritas Loan”), under which purchases of new software licenses and support were financed. The loan principal is payable in three installments of $239,996 in January 2018, and $229,994 in both January and March of 2019. The loan does not accrue interest.

On December 30, 2015, the Company entered into a five year, $3.6 million note and security agreement with Hewlett-Packard Financial Services (“H-P Loan”), under which purchases of new server equipment, software license fees, maintenance fees and fees for other services were financed. The loan principal is payable in twenty quarterly installments of $195,000 beginning in April 2016 and accrues interest at 2.95%. The reductions to the principal balance applying the interest method to the required payments are as follows (dollars in thousands):


	Aggregate
Year	Amount
2019	$	554
2020		759
2021		193
	$	1,506

Parent Company had previously entered into a $5.0 million master lease facility with Bank of America (“Master Lease Agreement”), under which purchases of new equipment were financed. Each equipment lease under the Master Lease Agreement was structured as a capital lease and had a separate 48‑month term from its inception date, at the end of which Parent Company could purchase the underlying equipment for $1. At December 31, 2017, all capital leases under this facility were fully paid.

On August 10, 2012, Parent Company entered into a $25.0 million master lease facility with BMO Harris Equipment Finance Company (“BMO”) to finance equipment and construction expenditures related to the build‑out of the Company’s new headquarters in lower Manhattan. The original amount borrowed of $21.2 million had a 3.39% fixed‑rate term financing structured as a capital lease with a 48‑month term that began upon the substantial completion of the build-out, at the end of which Parent Company may purchase the underlying assets for $1. At December 31, 2018 and 2017, the loan outstanding under the BMO facility was fully paid.

Interest expense on the 2018 Credit Agreement, the Master Lease Agreement and the BMO facility, including commitment fees and the amortization of debt issuance costs totaled $1.9 million, $2.0 million and $2.2 million in 2018, 2017 and 2016, respectively.