Western Digital 2008 Annual Report Download - page 46

Long-Term Debt
On February 11, 2008, Western Digital Technologies, Inc. (“WDTI”), a wholly owned subsidiary of the Company,
entered into a five-year Credit Agreement (the “Credit Facility”) with JPMorgan Chase Bank, N.A., as administrative agent,
Citigroup Global Markets Inc., as syndication agent, JP Morgan Securities Inc. and Citigroup Global Markets Inc., as
arrangers, and Bank of America, N.A., HSBC Bank USA, National Association and The Royal Bank of Scotland plc, as
co-documentation agents, and lenders party thereto.
The Credit Facility provides for a $750 million unsecured loan consisting of a $500 million term loan facility and a
$250 million revolving credit facility. The revolving credit facility includes borrowing capacity available for letters of
credit and for short-term borrowings referred to as swingline. In addition, WDTI may elect to expand the Credit Facility
by up to $250 million if existing or new lenders provide additional term or revolving commitments.
The $750 million available under the Credit Facility was borrowed on February 11, 2008 and was used, together
with additional cash from the accounts of WDTI, to repay in full the $760 million previously borrowed under a bridge
facility that had been used to fund the Acquisition. As of June 27, 2008, the Company repaid the amounts borrowed
under the revolving credit facility leaving $250 million available for future borrowings.
Borrowings under the Credit Facility bear interest at a rate equal to, at the option of WDTI, either (a) a LIBOR rate
determined by reference to the cost of funds for Eurodollar deposits for the interest period relevant to such borrowing,
adjusted for certain additional costs (the “Eurocurrency Rate”) or (b) a base rate determined by reference to the higher of
(i) the federal funds rate plus 0.50% and (ii) the prime rate as announced by JPMorgan Chase Bank, N.A. (the “Base
Rate”), in each case plus an applicable margin. The applicable margin for borrowings under the term loan facility ranges
from 1.25% to 1.50% with respect to borrowings at the Eurocurrency Rate and 0.0% to 0.125% with respect to
borrowings at the Base Rate. The applicable margin for revolving loan borrowings under the revolving credit facility
ranges from 0.8% to 1.125% with respect to borrowings at the Eurocurrency Rate and 0.0% to 0.125% with respect to
borrowings at the Base Rate. The applicable margins for borrowings under the Credit Facility are determined based upon
a leverage ratio of the Company and its subsidiaries calculated on a consolidated basis. The interest rate at June 27, 2008
was 3.75%.
In addition to paying interest on outstanding principal under the Credit Facility, WDTI is required to pay a facility
fee to the lenders under the revolving credit facility in respect of the aggregate revolving commitments thereunder. The
facility fee rate ranges from 0.20% to 0.375% per annum and is determined based upon a leverage ratio of the Company
and its subsidiaries calculated on a consolidated basis. WDTI is also required to pay letter of credit fees (a) to the
revolving credit facility lenders on the aggregate face amount of all outstanding letters of credit equal to an applicable
margin in effect with respect to the Eurocurrency Rate borrowings under the revolving credit facility and (b) to the letter
of credit issuer computed at a rate equal to 0.125% per annum on the face amount of the letter of credit, plus such letter of
credit issuer’s customary documentary and processing fees and charges.
Beginning on June 30, 2009, WDTI is required under the term loan facility to make regularly scheduled payments
of principal in quarterly installments equal to a percentage of the original principal amount of the term loan as follows:
3.75% per quarter for each of the four quarters ended June 30, 2009, September 30, 2009, December 31, 2009 and
March 31, 2010, 5% per quarter for each of the four quarters ended June 30, 2010, September 30, 2010, December 31,
2010 and March 31, 2011, 6.25% per quarter for each of the four quarters ended June 30, 2011, September 30, 2011,
December 31, 2011 and March 31, 2012, and 10% per quarter for each of the three quarters ended June 30, 2012,
September 30, 2012 and December 31, 2012, with the balance due and payable at maturity on February 11, 2013.
The Credit Facility requires WDTI to comply with a leverage ratio and an interest coverage ratio calculated on a
consolidated basis for the Company and its subsidiaries. In addition, the Credit Facility contains customary covenants,
including covenants that limit or restrict WDTI’s and its subsidiaries’ ability to: incur liens, incur indebtedness, make
certain restricted payments, merge or consolidate and enter into certain speculative hedging arrangements. Upon the
occurrence of an event of default under the Credit Facility, the lenders may cease making loans, terminate the Credit
Facility and declare all amounts outstanding to be immediately due and payable. The Credit Facility specifies a number of
events of default (some of which are subject to applicable grace or cure periods), including, among others, non-payment
defaults, covenant defaults, cross-defaults to other material indebtedness, bankruptcy and insolvency defaults and
material judgment defaults. As of June 27, 2008, WDTI was in compliance with all covenants.
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