Computer Associates 2009 Annual Report Download - page 47

The 2008 Revolving Credit Facility contains customary covenants for transactions of this type, including two financial
covenants: (i) for the 12 months ending each quarter-end, the ratio of consolidated debt for borrowed money to
consolidated cash flow, each as defined in the 2008 Revolving Credit Facility, must not exceed 4.00 to 1.00; and (ii) for
the 12 months ending each quarter-end, the ratio of consolidated cash flow to the sum of interest payable on, and
amortization of debt discount in respect of, all consolidated debt for borrowed money, as defined in the 2008 Revolving
Credit Facility, must not be less than 5.00 to 1.00. In addition, as a condition precedent to each borrowing made under
the 2008 Revolving Credit Facility, as of the date of such borrowing, (i) no event of default shall have occurred and be
continuing and (ii) we are to reaffirm that the representations and warranties made by us in the 2008 Revolving Credit
Facility (other than the representation with respect to material adverse changes, but including the representation
regarding the absence of certain material litigation) are correct. As of March 31, 2009, we are in compliance with these
debt covenants.
6.500% Senior Notes
In fiscal 1999, we issued $1,750 million of unsecured 6.500% Senior Notes in a transaction pursuant to Rule 144A
under the Securities Act of 1933 (Rule 144A). In the first quarter of fiscal 2009, we paid the $350 million
6.500% Senior Notes that was due and payable at that time. Subsequent to this scheduled payment, there were no
further amounts due under this issuance.
1.625% Convertible Senior Notes
In fiscal 2003, we issued $460 million of unsecured 1.625% Convertible Senior Notes (1.625% Notes) due December
2009, in a transaction pursuant to Rule 144A. The 1.625% Notes are senior unsecured indebtedness and rank equally
with all existing senior unsecured indebtedness. Concurrent with the issuance of the 1.625% Notes, we entered into call
spread repurchase option transactions (1.625% Notes Call Spread) to partially mitigate potential dilution from
conversion of the 1.625% Notes. The option purchase price of the 1.625% Notes Call Spread was $73 million and the
entire purchase price was charged to stockholders’ equity in December 2002. Under the terms of the 1.625% Notes Call
Spread, we can elect to receive (i) outstanding shares equivalent to the number of shares that will be issued if all of the
1.625% Notes are converted into shares (23 million shares) upon payment of an exercise price of $20.04 per share
(aggregate price of $460 million); or (ii) a net cash settlement, net share settlement or a combination, whereby we will
receive cash or shares equal to the increase in the market value of the 23 million shares from the aggregate value at the
$20.04 exercise price (aggregate price of $460 million), subject to the upper limit of $30.00 discussed below. The
1.625% Notes Call Spread is designed to partially mitigate the potential dilution from conversion of the 1.625% Notes,
depending upon the market price of our common stock at such time. The 1.625% Notes Call Spread can be exercised in
December 2009 at an exercise price of $20.04 per share. To limit the cost of the 1.625% Notes Call Spread, an upper
limit of $30.00 per share has been set, such that if the price of the common stock is above that limit at the time of
exercise, the number of shares eligible to be purchased will be proportionately reduced based on the amount by which
the common share price exceeds $30.00 at the time of exercise. As of March 31, 2009, the estimated fair value of the
1.625% Notes Call Spread was $34 million, which was based upon valuations from independent third-party financial
institutions.
Fiscal Year 2005 Senior Notes
In November 2004, we issued an aggregate of $1 billion of unsecured Senior Notes (collectively, the 2005 Senior Notes)
in a transaction pursuant to Rule 144A. We issued $500 million of 4.75%, 5-year notes due December 2009 and
$500 million of 5.625%, 10-year notes due December 2014. In December 2007, the 5.625% Senior Notes due
December 2014 were renamed the 6.125% Senior Notes due December 2014 (see below for additional information).
4.750% Senior Notes due December 2009: During the fourth quarter of fiscal 2009, we completed a tender offer to
repay a portion of our 4.750% Senior Notes due December 1, 2009, under which we repaid $176 million of the
aggregate principal amount of the notes, exclusive of accrued interest. During the third quarter of fiscal 2009, we also
repaid $148 million of the aggregate principal amount of our 4.750% Senior Notes due December 2009 on the open
market at a price of $143 million in cash, exclusive of accrued interest. As a result of this repayment, we recognized a
gain of $5 million in the “Other (gains) expenses, net” line of the Consolidated Statements of Operations in the third
quarter. At March 31, 2009, $176 million of our 4.750% Senior Notes remains outstanding.
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