TRIPLE-S MANAGEMENT CORP - 10-K filing on 2017-03-10

Long-Term Borrowings

12 Months Ended

Dec. 31, 2016

12.	Long-Term Borrowings

A summary of the borrowings entered by the Company as of December 31 is as follows:

	2016		2015

Senior unsecured notes payable of $60,000 issued on
December 2005; due December 2020. Interest is payable monthly at a fixed rate of 6.60%.	$	24,000	$	24,000
Secured loan payable of $41,000, payable in monthly installments of $137 through July 1, 2024, plus interest at a rate reset periodically of 100 basis points over selected LIBOR maturity (which was 1.23% at December 31, 2015.)		-		12,827
Secured loan payable of $11,187, payable in monthly installments of $137 through October 1, 2023, plus interest at a rate reset periodically of 100 basis points over selected LIBOR maturity (which was 1.77% at December 31, 2016.)		11,187		-

Total borrowings		35,187		36,827

Less unamortized debt issuance costs		102		-

	$	35,085	$	36,827

Aggregate maturities of the Company’s borrowings as of December 31, 2016 are summarized as follows:

Year ending December 31
2017		1,640
2018		1,640
2019		1,640
2020		25,640
2021		1,640
Thereafter		2,987
	$	35,187

All of the Company’s senior notes may be prepaid at par, in total or partially, five years after issuance as determined by the Company. The Company’s senior unsecured notes contain certain non-financial covenants with which the Company has complied at December 31, 2016.

On December 28, 2016, TSM entered into a $35,500 credit agreement with a commercial bank in Puerto Rico. The agreement consists of three term loans: (i) Term Loan A in the principal amount of $11,187, (ii) Term Loan B in the principal amount of $20,150 and (iii) Term Loan C in the principal amount of $4,116. Term Loan A matures in October 2023 while the Term Loans B and C mature in January 2024. Term Loan A was used to refinance the previous $41,000 secured loan payable with the same commercial bank in Puerto Rico. Proceeds from Term Loans B and C were received on January 11, 2017 and were used to prepay the outstanding principal amount plus accrued interest of the 6.6% Senior Unsecured Notes due January 2021 ($24,000), and fund a portion of a debt service reserve for the Loan (approximately $200). Pursuant to the credit agreement, interest is payable on the outstanding balance of the Loan at the following annual rate: (1) 1% over LIBOR for Term Loan A, (ii) 2.75% over LIBOR for Term Loan B, and (iii) 3.25% over LIBOR for Term Loan C. Interest shall be payable commencing on January 1, 2017, in the case of Term Loan A, and on February 1, 2017, in the case of Term Loan B and Term Loan C. The Credit Agreement includes certain financial and non-financial covenants, including negative covenants imposing certain restrictions on the Corporation’s business. The Company was in compliance with all these covenants as of December 31, 2016.

The credit agreement is guaranteed by a first mortgage held by the bank on the Company’s land, building, and substantially all leasehold improvements, as collateral for the term of the loan under a continuing general security agreement. This credit agreement contains certain non-financial covenants, which are customary for this type of facility, including but not limited to, restrictions on the granting of certain liens, limitations on acquisitions and limitations on changes in control and dividends.

The Company may, at its option, upon notice, as specified in the credit agreement, redeem and prepay prior to maturity, all or any part of the Loan and from time to time upon the payment of a penalty fee of 3% during the first year, 2% during the second year and 1% during the third year, and thereafter, at par, as specified in the credit agreement, together with accrued and unpaid interest, if any, to the date of redemption specified by the Company.

Interest expense on the above borrowings amounted to $1,763, $2,435, and $3,639, for the years ended December 31, 2016, 2015, and 2014, respectively.