## Net Interest-Bearing Debt 

Our net interest-bearing debt is comprised of working capital credit and term loan facilities, and finance leases, less cash. Our net interest-bearing debt position increased to a liability of $332.0 million at December 28, 2013 compared to a liability of $311.8 million at December 29, 2012. This $20.2 million increase reflects the use of debt to acquire American Pride, partially offset by positive cash flow generated from operations. This acquisition is explained in Section 5.1 “The American Pride Acquisition” of this MD&A. 

## Term Loan Facility 

High Liner Foods entered into a $250.0 million senior secured term loan facility (“Term Loan”) in December 2011. This facility was amended in February 2013 resulting in the following changes: 

• Interest rates decreased to LIBOR plus 3.5%, with a LIBOR floor of 1.25% from LIBOR plus 5.5% and a floor of 1.5%; 

• The available amount or “basket” for dividends and normal course issuer bid (“NCIB”) payments was increased to $15.5 million from the previous limit of $8.0 million. Dividends and NCIB payments are allowed beyond the basket as defined free cash flow is generated and not required for debt repayment; 

• A prepayment penalty of 1% was in place until February 8, 2014; 

• Leverage ratios were amended and step down leverage requirements removed so that the debt to EBITDA ratio limit is now 4.5x for the term of the loan; 

• The interest coverage covenant was removed; and 

• Other minor changes relating to relaxing the requirements around investments and acquisitions. 

The amortization and maturity date are unchanged, meaning the full amount of the remaining debt is due to be paid in December 2017. 

Substantially, all tangible and intangible assets (excluding working capital) of the Company are pledged as collateral for the Term Loan. 

Minimum repayments are required on an annual basis, plus additional payments based on a leverage test, up to 50% of defined excess cash flow beginning in 2013, based on the previous year’s cash flow. In March 2013, we paid 25% of our excess cash flow for 2012 which was $13.8 million. Due to this excess cash flow payment, which in accordance with the terms of the debt agreement is applied against the principal payments otherwise due, there were no additional repayments in 2013 and there will be no regularly scheduled repayments in 2014. There will be no excess cash flow payment in 2014 because the defined excess cash flow was negative in 2013 due primarily to the American Pride Acquisition described in Section 5.1 of this MD&A. 

The terms of the long-term debt facility required us to protect 50% of the variable interest rate for a fixed rate until December 2013. A derivative financial instrument was therefore purchased in the second quarter of 2012 which results in the LIBOR rate on 50% of the Term Loan being capped at 1.5% until April 2014. Also on May 3, 2012, we entered into an interest rate swap to exchange floating three month LIBOR for a fixed rate on our Term Loan, with an embedded floor of 1.5%, for a notional amount of $100.0 million for the period of April 4, 2014 until April 4, 2016. On a quarterly basis starting in 2014, we are required to pay the fixed swap rate and expect to receive the floating three month LIBOR rate (but no 

less than 1.5%), effectively fixing the rate between 1.747% to 1.997%. See Section 4.5 for a description of the implication of such swap on our financial results. 

As the interest rates on the long-term debt facility were fixed on only a portion of the US$250.0 million face value of the debt, the other portion of the debt continues to be at variable interest rates. As such, we expect that there will be fluctuations in interest expense due to changes in interest rates if LIBOR is higher than the floor of 1.25%. 

## Working Capital Credit Facility 

We entered into a $120.0 million asset-based working capital facility in November 2010 with the Royal Bank of Canada as collateral and administrative agent. In December 2011, this facility was amended to increase it to $180.0 million, of which $125.0 million is allocated to our U.S. operations and the remainder is allocated to our Canadian operations. In February 2013, the facility was amended again with changes to interest rates and increased flexibility around acquisitions being the major changes. The working capital facility expires in 2016 and provides, after the February 2013 amendment, for the following based on the “Average Adjusted Aggregate Availability” as defined in the credit agreement: 

• Canadian Prime Rate loans denominated in CAD and Canadian Base Rate and U.S. Prime Rate loans denominated in USD at Prime or Base Rate plus 0.00% to 0.75%; 

• Bankers’ Acceptances (BA) loans at BA rates plus 1.75% to 2.25%; 

• LIBOR advances at LIBOR plus 1.75% to 2.25; and 

• Unused line fees of 0.25% to 0.375%. 

At the end of the fourth quarter of 2013, we were borrowing at the following rates: 

• Canadian Prime Rate loans denominated in CAD and Canadian Base Rate and U.S. Prime Rate loans denominated in USD at Prime or Base Rate plus 0.50%; 

• Bankers’ Acceptances (BA) loans at BA rates plus 2.00%; 

• LIBOR advances at LIBOR plus 2.00%; and 

• Unused line fees of 0.375%. 

Excluding any major acquisitions, we believe the asset-based working capital facility should be sufficient to fund all of the Company’s current cash requirements for 2014. 

We also entered into interest rate swaps to hedge a portion of our working capital loans. The swaps are for a notional $50 million for the period of May 4, 2012 to March 4, 2014, and then for $30 million for the period March 5, 2014 to March 4, 2015, at an average LIBOR rate of 0.719% and 0.726%, respectively. These swaps effectively fix the interest rate on a portion of our working capital loans. 

Full details of the financing arrangements are included in notes 12 and 13  to the Consolidated Financial Statements. 

Prior to the American Pride Acquisition in October 2013, average short-term borrowings in 2013 were approximately $52.0 million compared to approximately $100.0 million in 2012. The decrease in short-term borrowings was the result of positive cash flow generated from operations and decreases in working capital. 

At the end of the fourth quarter of 2013, the Company had $67.9 million of unused borrowing capacity taking into account both margin calculations and the total line availability. 

