Long-Term Debt and Revolving Credit Facility

9 Months Ended

Sep. 30, 2013

Long-Term Debt and Revolving Credit Facility

Long-Term Debt and Revolving Credit Facility

Note 10—Long-Term Debt and Revolving Credit Facility

Pursuant to an indenture dated as of October 1, 2009 (the “Indenture”), among Stream, certain of our subsidiaries and Wells Fargo Bank, National Association, as trustee, we issued $200 million aggregate principal amount of 11.25% Senior Secured Notes due 2014 (the “Notes”) at an initial offering price of 95.454% of the principal amount, the proceeds of which were used to pay off the debt from our Fifth Amended and Restated Revolving Credit, Term Loan and Security Agreement, dated as of January 8, 2009, as amended, with PNC Bank, National Association and other signatories thereto along with debt acquired from EGS. On March 8, 2013, we issued an additional $30 million aggregate principal amount of the Notes pursuant to the Indenture at an initial offering price of 102.00% of the principal amount (plus accrued interest), the proceeds of which were used to pay down our credit facility following the acquisition of LBM. The Notes are scheduled to be redeemed on October 1, 2014.

In addition, we and certain of our subsidiaries (collectively, the “Borrowers”) entered into a credit agreement, dated as of October 1, 2009, as amended by the First Amendment to Credit Agreement dated June 3, 2011, the Second Amendment to Credit Agreement dated November 1, 2011 and the Third Amendment to Credit Agreement dated December 27, 2012 (as amended, the “Credit Agreement”), with Wells Fargo Capital Finance, LLC, as agent and co-arranger, and Goldman Sachs Lending Partners LLC, as co-arranger, and each of the lenders party thereto, as lenders, providing for revolving credit financing (the “ABL Facility”) of up to $125 million, including a $20 million sub-limit for letters of credit. The ABL Facility has a term of five years effective from the date of the Third Amendment to Credit Agreement or 120 days prior to the maturity of our Notes (including any refinancing or extension of the Notes), whichever is less, at an interest rate of Wells Fargo’s base rate plus 150 basis points or LIBOR plus 250 basis points at our discretion.

We currently intend to replace, refinance or extend our ABL Credit Agreement at or prior to its maturity in June 2014 and to replace, refinance or extend the Notes at or prior to their maturity in October 2014. However, there can be no assurance that we will be able to do so on terms favorable to us, or at all. We believe that the renegotiated financing, combined with our cash generated from operations and existing cash and cash equivalents, should be sufficient to meet expected liquidity needs for the next 12 months.

We capitalized fees of $8,966 and $5,642 associated with the Notes and the Credit Agreement, respectively, at the inception of these agreements and subsequent amendments that are being amortized over their respective lives. We amortized $1,093 and $3,090 of such capitalized fees into expense for the three and nine months ended September 30, 2013.

The ABL facility has a fixed charge coverage ratio financial covenant that is operative when our availability under the facility is less than $25 million. As of September 30, 2013, we had $87,226 available under the ABL Facility. We made draws on the ABL Facility of $256,966 and $237,312 for the nine months ended September 30, 2013 and 2012, respectively, and payments on the ABL Facility of $261,850 and $245,407 for the nine months ended September 30, 2013 and 2012, respectively. We are in compliance with the financial covenant in the Credit Agreement as of September 30, 2013. Substantially all of the assets of Stream excluding intangible assets secure the Notes and the ABL Facility. See Note 16 for Guarantor Financial Information.

Long-term borrowings consist of the following:

	September 30, 2013			December 31, 2012
Revolving line of credit	$	29,797		$	34,680
11.25% Senior Secured Notes	230,000			200,000
Other	16,378			14,904
	276,175			249,584
Less: current portion	(37,860		)	(5,333		)
Less: discount on notes payable	(1,946		)	(3,897		)
Long-term debt	$	236,369		$	240,354

Minimum principal payments on long-term debt subsequent to September 30, 2013 are as follows:

	Total
2013	$	1,233
2014	267,689
2015	4,854
2016	1,106
2017	1,293
Total	$	276,175

We had Letters of Credit in the aggregate outstanding amounts of zero and $3,245 at September 30, 2013 and December 31, 2012, respectively.

We had $299 and $380 of restricted cash as of September 30, 2013 and December 31, 2012, respectively.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

Stream Global Services, Inc. 10-Q