Quarterly report pursuant to Section 13 or 15(d)

Debt

v3.3.0.814
Debt
 9 Months Ended
Sep. 30, 2015
Debt Disclosure [Abstract]  
Debt
Debt

Debt consisted of the following (in millions):
 
September 30,
2015
 
December 31,
2014
2015 Credit Agreement (a)
$
425.0

 
$
—

2011 Credit Agreement (b)
—

 
432.0

Senior Notes, including premium of $2.1 and $2.5 (c)
677.1

 
677.5

Capital leases (d)
66.1

 
70.0

Total debt
1,168.2

 
1,179.5

Less current portion of debt
(5.5
)
 
(5.3
)
Debt
$
1,162.7

 
$
1,174.2


(a)
On April 20, 2015, Starz, LLC entered into a credit agreement (“2015 Credit Agreement”) that provides for $1,000.0 million in revolving loans with a $50.0 million sub-limit for stand-by letters of credit. Net proceeds from the 2015 Credit Agreement were used to repay and terminate the 2011 Credit Agreement (as defined below). Borrowings under the 2015 Credit Agreement may be prepaid at any time and from time to time without penalty other than customary breakage costs. Any amounts prepaid on the 2015 Credit Agreement may be reborrowed. The 2015 Credit Agreement is scheduled to mature on April 20, 2020. As of September 30, 2015, Starz, LLC had $575.0 million of borrowing capacity under the 2015 Credit Agreement.

Interest on each loan under the 2015 Credit Agreement 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 0.50% and 1.25% depending on the consolidated leverage ratio of Starz, LLC, as defined in the 2015 Credit Agreement. The alternate base rate is the highest of (a) the Prime Rate, (b) the Federal Funds Effective Rate plus ½ of 1% or (c) LIBOR for a one-month interest period plus 1%. Borrowings that are LIBOR loans bear interest at a per annum rate equal to the applicable LIBOR plus a margin that varies between 1.50% and 2.25% depending on the consolidated leverage ratio of Starz, LLC. The 2015 Credit Agreement requires Starz, LLC to pay a commitment fee on any unused portion. The commitment fee varies between 0.25% and 0.40%, depending on the consolidated leverage ratio of Starz, LLC.

As of September 30, 2015, the following borrowings and related LIBOR or alternate base rate interest rates were outstanding under the 2015 Credit Agreement (dollars in millions):

LIBOR or alternate base rate period:
Interest Rate
 
Loan Amount
September 2015 to October 2015
1.9543%
 
$
95.0

September 2015 to October 2015
1.9564%
 
301.0

September 2015 and forward
4.0000%
 
29.0

 
 
 
$
425.0


The 2015 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 2015 Credit Agreement. As of September 30, 2015, Starz, LLC was in compliance with all covenants under the 2015 Credit Agreement.

(b)
On November 16, 2011, Starz, LLC entered into a credit agreement (“2011 Credit Agreement”) that provided for $1,000.0 million of revolving loans and a $50.0 million sub-limit for standby letters of credit with a maturity date of November 16, 2016. On April 20, 2015, Starz, LLC repaid and terminated the 2011 Credit Agreement using borrowings under the 2015 Credit Agreement.

(c)
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 (“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 September 30, 2015, Starz, LLC was in compliance with all covenants under the Senior Notes.

(d)
On January 11, 2013, Starz, LLC entered into a commercial lease for its headquarters building. The term of the lease is ten years, with four successive five-year renewal periods at the option of Starz, LLC. Starz, LLC recorded a 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 September 30, 2015, the fair value of the Senior Notes was $680.0 million which was based upon quoted prices in active markets. Starz believes the fair value of the 2015 Credit Agreement approximates its carrying value as of September 30, 2015 due to its variable rate nature and Starz’s stable credit spread.

Amounts totaling $1.6 million, $1.2 million, $4.9 million and $3.0 million of interest expense have been capitalized as investment in films and television programs during the three months ended September 30, 2015 and 2014 and the nine months ended September 30, 2015 and 2014, respectively.