American Home Shield 2015 Annual Report Download - page 97

Table of Contents
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million outstanding under the Old Term Facilities. In addition, $42 million of available cash was used to pay debt issuance costs of
$24 million and to pay original issue discount of $18 million in connection with the Term Loan Facility.
On April 1, 2015, the Company entered into the First Term Loan Amendment, which provides for the April Incremental
Term Loans in an aggregate principal amount of $175 million. On April 1, 2015, the Company used the net proceeds from the April
Incremental Term Loans, together with cash on hand, to redeem the remaining outstanding $200 million in aggregate principal amount
of the 8% 2020 Notes at a redemption price of 106.0% of the principal amount. In addition, $2 million of available cash was used to
pay debt issuance costs in connection with the April Incremental Term Loans.
On August 17, 2015, the Company entered into the Second Term Loan Amendment, which provides for the August
Incremental Term Loans in an aggregate principal amount of $400 million. On August 17, 2015, the Company used the net proceeds
from the August Incremental Term Loans, together with cash on hand, to redeem the remaining outstanding $488 million in aggregate
principal amount of the 7% 2020 Notes at a redemption price of 105.25% of the principal amount. In addition, $5 million of available
cash was used to pay debt issuance costs of $3 million and original issue discount of $2 million in connection with the August
Incremental Term Loans.
The interest rates applicable to the term loans under the Term Loan Facility are based on a fluctuating rate of interest
measured by reference to either, at The Company’s option, (i) an adjusted LIBOR (subject to a floor of 1.00 percent) plus a margin of
3.25 percent per annum or (ii) an alternate base rate (subject to a floor of 2.00 percent) plus a margin of 2.25 percent per annum.
Voluntary prepayments of borrowings under the Term Loan Facility are permitted at any time, in minimum principal amounts, without
premium or penalty.
The Term Loan Facility and the guarantees thereof are secured by substantially all of the tangible and intangible assets of the
Company and certain of its domestic subsidiaries, excluding certain subsidiaries subject to regulatory requirements in various states,
including pledges of all the capital stock of all direct domestic subsidiaries (other than foreign subsidiary holding companies, which
are deemed to be foreign subsidiaries) owned by the Company or any Guarantor and of up to 65% of the capital stock of each direct
foreign subsidiary owned by the Company or any Guarantor. The Term Loan Facility security interests are subject to certain
exceptions, including, but not limited to, exceptions for (i) equity interests, (ii) indebtedness or other obligations of subsidiaries,
(iii) real estate or (iv) any other assets, if the granting of a security interest therein would require that any notes issued under the
Company’s indenture dated as of August 15, 1997 be secured. The Term Loan Facility is secured on a pari passu basis with the
security interests created in the same collateral securing the Revolving Credit Facility.
The Company has historically entered into interest rate swap agreements. Under the terms of these agreements, the Company
pays a fixed rate of interest on the stated notional amount and receives a floating rate of interest (based on one month LIBOR) on the
stated notional amount. Therefore, during the term of the swap agreements, the effective interest rate on the portion of the term loans
equal to the stated notional amount is fixed at the stated rate in the interest rate swap agreements plus the incremental borrowing
margin.
On July 23, 2014, the Company entered into two four-year interest rate swap agreements effective August 1, 2014. The
aggregate notional amount of the agreements was $300 million. Under the terms of the agreements, the Company will pay a weighted-
average fixed rate of interest of 1.786 percent on the $300 million notional amount, and the Company will receive a floating rate of
interest (based on one-month LIBOR) on the notional amount. Therefore, during the term of the agreements, the effective interest rate
on $300 million of the Term Loan Facility is fixed at a rate of 1.786 percent, plus the incremental borrowing margin of 3.25 percent.
On July 23, 2014, the Company entered into three forty-one month interest rate swap agreements effective March 1, 2015.
The aggregate notional amount of the agreements was $400 million. Under the terms of the agreements, the Company will pay a
weighted-average fixed rate of interest of 1.927 percent on the $400 million notional amount, and the Company will receive a floating
rate of interest (based on one-month LIBOR) on the notional amount. Therefore, during the term of the agreements, the effective
interest rate on $400 million of the Term Loan Facility is fixed at a rate of 1.927 percent, plus the incremental borrowing margin of
3.25 percent.
The changes in interest rate swap agreements, as well as the cumulative interest rate swaps outstanding, are as follows:
Weighted
Notional Average Fixed
(In millions) Amount Rate(1)
Interest rate swap agreements in effect as of December 31, 2013 $ — — %
Entered into effect 300
Interest rate swap agreements in effect as of December 31, 2014 300 1.786 %
Entered into effect 400
Interest rate swap agreements in effect as of December 31, 2015 $ 700 1.867 %
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(1) Before the application of the applicable borrowing margin.
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