Quarterly report pursuant to Section 13 or 15(d)

Debt

v2.4.0.8
Debt
 6 Months Ended
Jun. 30, 2014
Debt Disclosure [Abstract]  
Debt
Debt

Debt consists of the following (in millions):
 
June 30,
2014
 
December 31,
2013
Revolving Credit Facility (a)
$
365.0

 
$
306.5

Senior Notes, including premium of $2.8 and $3.0 (b)
677.8

 
678.0

Capital leases (c)
72.5

 
74.9

Total debt
1,115.3

 
1,059.4

Less current portion of debt
(5.1
)
 
(4.9
)
Debt
$
1,110.2

 
$
1,054.5


(a)
Starz, LLC has entered into a credit agreement that provides for a $1,000.0 million senior secured revolving credit facility with a $50.0 million sub-limit for standby letters of credit (“Revolving Credit Facility”) which matures on November 16, 2016. As of June 30, 2014, $635.0 million of borrowing capacity was available under the Revolving Credit Facility.

Interest on each loan under the Revolving Credit Facility is payable at either an alternate base rate or LIBOR at Starz, LLC’s election. Borrowings that are alternate base rate loans bear interest at a per annum rate equal to the alternate base rate plus a margin that varies between 0.5% and 1.5% depending on the consolidated leverage ratio, as defined in the credit agreement. The alternate base rate is the highest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus ½ of 1.0% or (c) LIBOR for a one-month interest period plus 1.0%. Borrowings that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin that varies between 1.5% and 2.5% depending on the consolidated leverage ratio. The credit agreement requires Starz, LLC to pay a commitment fee on any unused portion under the Revolving Credit Facility. The commitment fee varies between 0.25% and 0.50%, depending on the consolidated leverage ratio.

As of June 30, 2014, the following borrowings and related LIBOR or alternate base rate interest rates were outstanding under the Revolving Credit Facility (dollars in millions):

LIBOR or alternate base rate period:
Interest Rate
 
Loan Amount
June 2014 to July 2014
1.9009%
 
$
21.0

June 2014 to July 2014
1.9010%
 
292.0

June 2014 to July 2014
1.9015%
 
44.0

June 2014 and forward
4.0000%
 
8.0

 
 
 
$
365.0


The credit agreement contains certain covenants that include restrictions on, among others, incurring additional debt, paying dividends, entering into liens or guarantees, or making certain distributions, investments and other restricted payments. In addition, Starz, LLC must comply with certain financial covenants, including a consolidated leverage ratio, as defined in the agreement. As of June 30, 2014, Starz, LLC was in compliance with all covenants under the credit agreement.

(b)
Starz, LLC and Starz Finance Corp., a wholly-owned subsidiary, co-issued $675.0 million aggregate principal amount of 5.0% senior notes due September 15, 2019 (the “Senior Notes”). The Senior Notes bear interest at a rate of 5.0% payable semi-annually on September 15 and March 15 of each year and are guaranteed by Starz Entertainment.

The Senior Notes contain certain covenants that include restrictions on, among others, incurring additional debt, paying dividends, entering into liens and guarantees, or making certain distributions, investments and other restricted payments. As of June 30, 2014, Starz, LLC was in compliance with all covenants under the Senior Notes.

(c)
On January 11, 2013, Starz, LLC entered into a commercial lease with a subsidiary of Liberty Media for its headquarters building. The term of the lease is ten years, with successive five-year renewal periods at the option of Starz, LLC. Starz, LLC has recorded a $44.8 million capital lease in connection with this lease agreement with an imputed annual interest rate of 6.4%.

Starz Entertainment has entered into capital lease agreements for its transponder capacity. The agreements expire during 2018 to 2021 and have imputed annual interest rates ranging from 5.5% to 7.0%.

At June 30, 2014, the fair value of the Senior Notes was $704.5 million which was based upon quoted prices in active markets. Starz believes the fair value of the Revolving Credit Facility approximates its carrying value as of June 30, 2014 due to its variable rate nature and Starz’s stable credit spread.

Amounts totaling $0.9 million, $0.8 million, $1.8 million and $2.0 million of interest expense have been capitalized as investment in films and television programs during the three months ended June 30, 2014 and 2013 and the six months ended June 30, 2014 and 2013, respectively.