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SEC Filings

10-Q
GRAHAM HOLDINGS CO filed this Form 10-Q on 05/03/2017
Entire Document
 


5. DEBT
The Company’s borrowings consist of the following:
  
As of
  
March 31,
2017
 
December 31,
2016
(in thousands)
 
7.25% unsecured notes due February 1, 2019 (1)
$
399,166

 
$
399,052

UK Credit facility (2)
92,856

 
91,316

Other indebtedness
1,322

 
1,479

Total Debt
$
493,344

 
$
491,847

Less: current portion
(6,158
)
 
(6,128
)
Total Long-Term Debt
$
487,186

 
$
485,719

____________
(1)
The carrying value is net of $0.1 million of unamortized debt issuance costs as of March 31, 2017 and December 31, 2016, respectively.
(2)
The carrying value is net of $0.5 million of unamortized debt issuance costs as of March 31, 2017 and December 31, 2016, respectively.
The Company’s other indebtedness at March 31, 2017 is at interest rates from 2% and 6% and matures from 2019 to 2025.
On July 14, 2016, Kaplan entered into a Facility Agreement (the Kaplan Credit Agreement) among Kaplan International Holdings Limited, as borrower, the lenders party thereto, HSBC BANK PLC as Facility Agent, and other agents party thereto. The Kaplan Credit Agreement provides for a four-year credit facility in an aggregate principal amount of £75 million. Borrowings bear interest at a rate per annum of LIBOR plus an applicable interest rate margin between 1.25% and 1.75%, in each case determined on a quarterly basis by reference to a pricing grid based upon the Company's total leverage ratio. The Kaplan Credit Agreement requires that 6.66% of the amount of the loan be repaid on the first three anniversaries of funding, with the remaining balance due on July 1, 2020. The Kaplan Credit Agreement contains terms and conditions, including remedies in the event of a default by the Company, typical of facilities of this type and requires the Company to maintain a leverage ratio of not greater than 3.5 to 1.0 and a consolidated interest coverage ratio of at least 3.5 to 1.0 based upon the ratio of consolidated adjusted EBITDA to consolidated interest expense as determined pursuant to the Kaplan Credit Agreement. As of March 31, 2017, the Company is in compliance with all financial covenants.
On July 25, 2016, Kaplan borrowed £75 million under the Kaplan Credit Agreement. On the same date, Kaplan entered into an interest rate swap agreement with a total notional value of £75 million and a maturity date of July 1, 2020. The interest rate swap agreement will pay Kaplan variable interest on the £75 million notional amount at the three-month LIBOR, and Kaplan will pay the counterparties a fixed rate of 0.51%, effectively resulting in a total fixed interest rate of 2.01% on the outstanding borrowings at the current applicable margin of 1.50%. The interest rate swap agreement was entered into to convert the variable rate British pound borrowing under the Kaplan Credit Agreement into a fixed rate borrowing. The Company provided a guarantee on any borrowings under the Kaplan Credit Agreement. Based on the terms of the interest rate swap agreement and the underlying borrowing, the interest rate swap agreement was determined to be effective, and thus qualifies as a cash flow hedge. As such, changes in the fair value of the interest rate swap are recorded in other comprehensive income on the accompanying Condensed Consolidated Balance Sheets until earnings are affected by the variability of cash flows.
During the three months ended March 31, 2017 and 2016, the Company had average borrowings outstanding of approximately $493.0 million and $399.9 million, respectively, at average annual interest rates of approximately 6.3% and 7.2%, respectively. During the three months ended March 31, 2017 and 2016, the Company incurred net interest expense of $6.8 million and $7.4 million, respectively.
At March 31, 2017, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices (Level 2 fair value assessment), totaled $431.8 million, compared with the carrying amount of $399.2 million. At December 31, 2016, the fair value of the Company’s 7.25% unsecured notes, based on quoted market prices (Level 2 fair value assessment), totaled $438.7 million, compared with the carrying amount of $399.1 million. The carrying value of the Company’s other unsecured debt at March 31, 2017 approximates fair value.

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