Seagate 2008 Annual Report Download - page 98

Table of Contents
SEAGATE TECHNOLOGY
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
5. Credit Facilities, Long-Term Debt and Convertible Notes (Continued)
certain of its material subsidiaries and secured by a lien on substantially all of the Company's tangible and intangible assets.
The credit facility has various limitations on certain transactions that may occur, including limitations on: asset sales, liens, incurrence of
additional debt, issuance of preferred stock, redemption and repurchases of debt or stock, and payment of dividends.
The amended credit facility also contains three financial covenants:
• Minimum liquidity: Prior to January 1, 2010, the Company must maintain a minimum amount of liquidity in the form of cash,
cash equivalents and short-term investments of $600 million, including any cash drawn under the credit facility. After January 1,
2010, the Company must maintain a minimum amount of liquidity in the form of cash, cash equivalents and short term
investments of $500 million, excluding any cash drawn under the credit facility.
•
Fixed charge coverage ratio:
The Company must maintain a fixed charge ratio of at least 1.50.
•
Net leverage ratio:
The Company must not exceed a net leverage ratio of 1.80x for the quarter ended July 3, 2009, 2.65x for the
quarter ended October 2, 2009, 1.80x for the quarter ended January 1, 2010 and 1.50x for any subsequent quarter. By holding
proceeds of the Company's 10% Notes in escrow until no later than November 1, 2009, the notes are considered refinancing of
existing debt, as opposed to incremental debt, for the purpose of calculating its net leverage ratio.
As of July 3, 2009, the Company was in compliance with all of the covenants under its credit facility.
As amended, the senior secured credit facility bears interest per annum at a variable rate, at the Company's option, of LIBOR plus 350 basis
points or the Alternate Base Rate plus 250 basis points. The "Alternate Base Rate" is equal to the greatest of (i) the administrative agent's Prime
Rate, (ii) the Federal Funds effective rate plus 50 basis points and (iii) LIBOR for a one-month interest period plus 100 basis points. Borrowings
under the senior secured credit facility will continue to be prepayable at any time prior to maturity without penalty, other than customary
breakage costs. Current borrowings under the senior secured credit facility bear interest at LIBOR plus 350 basis points. As of July 3, 2009, the
senior secured credit facility was fully drawn.
Long-Term Debt
$430 Million Aggregate Principal Amount of 10% Senior Secured Second-Priority Notes due May 2014 (the "10% Notes"). On May 1,
2009, the Company's subsidiary, Seagate Technology International, completed the sale of $430 million aggregate principal amount of 10%
Senior Secured Second-Priority Notes Due May 2014, in a private placement exempt from the registration requirements of the Securities Act of
1933, as amended. The obligations under the 10% Notes are unconditionally guaranteed by the Company and certain of its material subsidiaries.
In addition, the obligations under the 10% Notes are secured by a second-priority lien on substantially all of the Company's tangible and
intangible assets. The indenture of the 10% Notes contains covenants that limit the Company's ability, and the ability of certain of its
subsidiaries, (subject to certain exceptions) to: incur additional debt or issue certain preferred stock, create liens, pay dividends, redeem or
repurchase debt or stock, sell certain assets, issue or sell capital stock of certain subsidiaries and enter into certain transactions with the
Company's stockholders or affiliates. The net proceeds from the offering of the 10% Notes were approximately $399 million, of which
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