Rayovac 2010 Annual Report Download - page 146

SPECTRUM BRANDS HOLDINGS, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
interest expense over the remaining life of the 9.5% Notes. During Fiscal 2010, the Company recorded $20,823
of fees in connection with the issuance of the 9.5% Notes. The fees are classified as Debt issuance costs within
the accompanying Consolidated Statement of Financial Position as of September 30, 2010 and will be amortized
as an adjustment to interest expense over the remaining life of the 9.5% Notes.
12% Notes
On August 28, 2009, in connection with emergence from the voluntary reorganization under Chapter 11 and
pursuant to the Plan, the Company issued $218,076 in aggregate principal amount of 12% Notes maturing
August 28, 2019. Semiannually, at its option, the Company may elect to pay interest on the 12% Notes in cash or
as payment in kind, or “PIK”. PIK interest would be added to principal upon the relevant semi-annual interest
payment date. Under the Prior Term Facility, the Company agreed to make interest payments on the 12% Notes
through PIK for the first three semi-annual interest payment periods. As a result of the refinancing of the Prior
Term Facility the Company is no longer required to make interest payments as payment in kind after the semi-
annual interest payment date of August 28, 2010. Effective with the payment date of August 28, 2010 the
Company gave notice to the trustee that the interest payment due February 28, 2011 would be made in cash.
During Fiscal 2010, the Company reclassified $26,955 of accrued interest from Other long term liabilities to
principal in connection with the PIK provision of the 12% Notes.
The Company may redeem all or a part of the 12% Notes, upon not less than 30 or more than 60 days
notice, beginning August 28, 2012 at specified redemption prices. Further, the indenture governing the 12%
Notes require the Company to make an offer, in cash, to repurchase all or a portion of the applicable outstanding
notes for a specified redemption price, including a redemption premium, upon the occurrence of a change of
control of the Company, as defined in such indenture.
At September 30, 2010 and September 30, 2009, the Company had outstanding principal of $245,031 and
$218,076, respectively, under the 12% Notes.
The indenture governing the 12% Notes (the “2019 Indenture”), contains customary covenants that limit,
among other things, the incurrence of additional indebtedness, payment of dividends on or redemption or
repurchase of equity interests, the making of certain investments, expansion into unrelated businesses, creation of
liens on assets, merger or consolidation with another company, transfer or sale of all or substantially all assets,
and transactions with affiliates.
In addition, the 2019 Indenture provides for customary events of default, including failure to make required
payments, failure to comply with certain agreements or covenants, failure to make payments on or acceleration of
certain other indebtedness, and certain events of bankruptcy and insolvency. Events of default under the indenture
arising from certain events of bankruptcy or insolvency will automatically cause the acceleration of the amounts due
under the 12% Notes. If any other event of default under the 2019 Indenture occurs and is continuing, the trustee for
the indenture or the registered holders of at least 25% in the then aggregate outstanding principal amount of the 12%
Notes may declare the acceleration of the amounts due under those notes.
The Company is subject to certain limitations as a result of the Company’s Fixed Charge Coverage Ratio
under the 2019 Indenture being below 2:1. Until the test is satisfied, Spectrum Brands and certain of its
subsidiaries are limited in their ability to make significant acquisitions or incur significant additional senior credit
facility debt beyond the Senior Credit Facilities. The Company does not expect its inability to satisfy the Fixed
Charge Coverage Ratio test to impair its ability to provide adequate liquidity to meet the short-term and long-
term liquidity requirements of its existing businesses, although no assurance can be given in this regard.
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