Seagate 2006 Annual Report Download - page 77

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)
payments. The 5.75% Debentures are currently convertible for a cash payment of $167.50 per $1,000 principal
amount of debentures.
$60 million LIBOR Based China Manufacturing Facility Loan. As a result of the Maxtor acquisition, the
Company assumed an outstanding plant construction loan in the amount of $30 million and an outstanding project
loan in the amount of $30 million from the Bank of China to Maxtor Suzhou (“MTS”). These borrowings are
collateralized by the Company’s facilities in Suzhou, China. The interest rate on the plant construction loan is
LIBOR plus 60 basis points, with the borrowings repayable in two installment payments of $15 million each, one due
in October 2008 and the other due in April 2009. The interest rate on the project loan is LIBOR plus 100 basis points,
and the borrowing is repayable in August 2009. Interest payments on both the construction loan and the project loan
are made semi-annually on October 15 and April 15. The loans require MTS to maintain annual financial covenants,
including a maximum liability to assets ratio and a minimum earnings to interest expense ratio, with which MTS was
in compliance at June 29, 2007.
In accordance with APBO No. 14, Accounting for Convertible Debt and Debt Issued with Stock Purchase
Warrants, (“APBO 14”), the Company determined the existence of substantial premium for both the 2.375% Notes
and 6.8% Notes and recorded the notes at par value with the resulting excess over par (the substantial premium)
recorded in Additional Paid-In Capital in Shareholders’
Equity. All other debt assumed in the Maxtor acquisition was
recorded at fair market value (see Note 10).
$400 Million Aggregate Principal Amount of 8% Senior Notes Previously due May 2009. In October 2006, the
Company redeemed its 8% Senior Notes due May 2009 (the “8% Notes”) at a redemption price of $1,040 per $1,000
principal amount of Notes for a total amount paid of $416 million. The redemption premium of $16 million as well
as approximately $3 million of unamortized issuance costs were recorded as interest expense in the Company’s
Consolidated Statement of Operations.
The Company has guaranteed all Senior Notes on a full and unconditional basis (see Note 14).
Revolving Credit Facility. HDD has a senior unsecured $500 million revolving credit facility that matures in
September 2011. The $500 million revolving facility, which was entered into in September 2006, replaced the then-
existing $100 million revolving credit facility.
The credit agreement that governs the Company’s revolving credit facility contains covenants that must be
satisfied in order to remain in compliance with the agreement. The credit agreement contains three financial
covenants: (1) minimum cash, cash equivalents and marketable securities; (2) a fixed charge coverage ratio; and (3) a
net leverage ratio. As of June 29, 2007, the Company is in compliance with all covenants.
The $500 million revolving credit facility is available for cash borrowings and for the issuance of letters of
credit up to a sub-limit of $100 million. Although no borrowings have been drawn under this revolving credit facility
to date, the Company had utilized $47 million for outstanding letters of credit and bankers’ guarantees as of June 29,
2007, leaving $453 million for additional borrowings. The credit agreement governing the revolving credit facility
includes limitations on the ability of the Company to pay dividends, including a limit of $300 million in any four
consecutive quarters.
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