Computer Associates 2012 Annual Report Download - page 85

on, and amortization of debt discount in respect of, all consolidated debt for borrowed money, as defined in the Credit Agreement,
must not be less than 3.50 to 1.00. At March 31, 2012, the Company was in compliance with all covenants.
In addition, future borrowings under the revolving credit facility require, at the date of a borrowing, that (i) no event of default shall
have occurred and be continuing and (ii) the Company reaffirm the representations and warranties it made in the Credit Agreement.
Notes: The Company’s 5.375% Notes and 6.125% Senior Notes (collectively, the “Notes”) are senior unsecured obligations and rank
equally in right of payment with all of the Company’s other existing and future senior unsecured indebtedness. The Notes are
subordinated to any future secured indebtedness to the extent of the assets securing such future indebtedness and structurally
subordinated to any indebtedness of the Company’s subsidiaries. The Company has the option to redeem the Notes at any time, at
redemption prices equal to the greater of (i) the principal amount of the securities to be redeemed or (ii) the sum of the present values
of the remaining scheduled payments of principal thereof and interest thereon that would be due on the securities to be redeemed,
discounted to the date of redemption on a semi-annual basis at the treasury rate plus 30 basis points and 20 basis points for the
5.375% Notes and the 6.125% Notes, respectively.
The maturity of the Notes may be accelerated by the holders upon certain events of default, including failure to make payments when
due and failure to comply with covenants or agreements of the Company set forth in the Notes or the Indenture after notice and
failure to cure.
5.375% Notes Due November 2019: During the third quarter of fiscal year 2010, the Company issued approximately $750 million
principal amount of 5.375% Notes due 2019 (the 5.375% Notes). The net proceeds of the offering were approximately $738 million,
after being issued at a discount and deducting expenses, underwriting fees and commissions of approximately $6 million. The
discount is being amortized over the term to maturity. In the event of a change of control, each noteholder will have the right to
require the Company to repurchase all or any part of such holder’s 5.375% Notes in cash at a price equal to 101% of the principal
amount of such Notes plus accrued and unpaid interest, if any, to the date of repurchase. This is subject to the right of holders of
record on the relevant interest payment date to receive interest due.
6.125% Notes Due December 2014: The Company has entered into interest rate swaps to convert $500 million of its 6.125% Notes
into floating interest rate payments through December 1, 2014. Under the terms of the swaps, the Company will pay quarterly interest
at an average rate of 2.88% plus the three-month London Interbank Offered Rate (LIBOR), and will receive payment at 5.625%. The
LIBOR based rate is set quarterly three months prior to the date of the interest payment. The Company designated these swaps as fair
value hedges and accounting for them in accordance with the shortcut method of FASB ASC Topic 815. The carrying value of the
6.125% Notes has been adjusted by an amount that is equal and offsetting to the fair value of the swaps.
Other Indebtedness: The Company has available an unsecured and uncommitted multi-currency line of credit to meet short-term
working capital needs for the Company’s subsidiaries operating outside the United States and uses guarantees and letters of credit
issued by financial institutions to guarantee performance on certain contracts. At each of March 31, 2012 and 2011, approximately
$55 million was pledged in support of bank guarantees and other local credit lines and none of these arrangements had been drawn
down by third parties.
The Company uses a notional pooling arrangement with an international bank to help manage global liquidity requirements. Under
this pooling arrangement, the Company and its participating subsidiaries may maintain either cash deposit or borrowing positions
through local currency accounts with the bank, so long as the aggregate position of the global pool is a notionally calculated net cash
deposit. Because it maintains a security interest in the cash deposits, and has the right to offset the cash deposits against the
borrowings, the bank provides the Company and its participating subsidiaries favorable interest terms on both. At March 31, 2012
and 2011, the borrowing positions outstanding under this cash pooling arrangement were as follows:
AT MARCH 31,
(in millions) 2012 2011
Borrowings $ 476 $ 260
Repayments (331) (260)
Foreign currency exchange effect (6) —
Total borrowing positions outstanding(1) $ 139 $—
(1) Included in “Accrued expenses and other current liabilities” in the Company’s Consolidated Balance Sheet.
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