This excerpt taken from the STX 10-Q filed May 6, 2009.
Amendment to Credit Facility
On April 3, 2009, the Company entered into a Second Amended and Restated Credit Agreement with the lenders thereunder (the Amended Credit Agreement), which replaced the credit agreement that governed its $500 million senior unsecured revolving credit facility (the Original Credit Agreement) and became effective on April 29, 2009. Pursuant to the Amended Credit Agreement, the Company agreed to reduce the lenders commitments under the facility to $350 million, in exchange for the relaxation of certain financial covenants. The facility may be further reduced from $350 million by cash proceeds from certain transactions over specified amounts, including certain asset sales and debt and equity issuances, which would require the Company to concurrently reduce its borrowings under the revolving credit facility by such amounts to comply with the reduction in commitments. The obligations under the revolving credit facility will continue to be guaranteed by the Company and will be additionally guaranteed by certain material subsidiaries and secured by a lien on substantially all of the Companys tangible and intangible assets. The Amended Credit Agreement will mature in September 2011.
As amended, the senior secured revolving credit facility bears interest per annum at a variable rate, at the Companys 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 agents 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 revolving credit facility bear interest at LIBOR plus 350 basis points.
As of April 3, 2009, the utilization of the senior secured revolving credit facility was $350 million in outstanding loans and approximately $45 million in outstanding letters of credit. In connection with entering into the Amended Credit Agreement, the $350 million in loans remained outstanding and the Company collateralized the $45 million of outstanding letters of credit with cash deposits.
The Original Credit Agreement contained covenants in order to remain in compliance with the agreement. Specifically, the Original Credit Agreement contained three financial covenants: (1) a covenant to maintain minimum cash, cash equivalents and marketable securities; (2) a fixed charge coverage ratio; and (3) a net leverage ratio. As of April 3, 2009, the Company was in compliance with all of the covenants under the Original Credit Agreement. In connection with entering into the Amended Credit Agreement, certain of these covenants were relaxed through the quarter ending January 1, 2010. After January 1, 2010, the financial covenants will revert to their previous levels under the Original Credit Agreement.
NOTES TO CONDENSED CONSOLIDATED FINANCIAL STATEMENTS(Continued)
On June 28, 2008, the Company adopted the provisions of SFAS No. 157, Fair Value Measurements, (SFAS No. 157) for all financial assets and financial liabilities. SFAS No. 157 defines fair value, establishes a framework for measuring fair value, and enhances disclosures about fair value measurements. SFAS No. 157 does not require any new fair value measurements, but applies to other accounting pronouncements that require or permit fair value measurements. The adoption of SFAS No. 157 did not have a material impact on the Companys consolidated financial statements.
In February 2008, the Financial Accounting Standards Board (FASB) issued FASB Staff Position (FSP) 157-2, Effective Date of FASB Statement No. 157, which delays the effective date of SFAS No.157 for all non-financial assets and non-financial liabilities, except for items recognized or disclosed at fair value on a recurring basis. Accordingly, the Company will not apply the provisions of SFAS No. 157 to non-financial assets and non-financial liabilities until July 2009, the beginning of its next fiscal year.