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Borrowings
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Aug. 31, 2012
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| Debt Disclosure [Abstract] | |||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||||
| BORROWINGS |
BORROWINGS:
Borrowings consist of the following:
Senior credit facility –
On May 3, 2012 (the “Closing Date”), the Company, Bank of America, N.A., as administrative agent, and certain other lenders (all such parties other than the Company are collectively referred to as the “Lenders”) entered into a new Credit Agreement (the “May 2012 Credit Agreement”). On August 8, 2012, the May 2012 Credit Agreement was amended and restated (the “August 2012 Restatement”). The May 2012 Credit Agreement together with the August 2012 Restatement is referred to as the “2012 Credit Agreement.” The 2012 Credit Agreement provides for aggregate credit facilities of $2,225.0 million, consisting of a $550.0 million term loan facility maturing on May 3, 2017 (the “Term A Facility”), a $250.0 million term loan facility maturing on May 3, 2019 (the “Term A-1 Facility”), a $575.0 million delayed draw term loan facility maturing on August 8, 2017 (the “Term A-2 Facility”), and an $850.0 million revolving credit facility (including a sub-facility for letters of credit of up to $200.0 million) which terminates on May 3, 2017 (the “Revolving Credit Facility”). The obligation of the relevant Lenders to make loans pursuant to the Term A-2 Facility (the “Term A-2 Loans”) terminates no later than December 30, 2013, and is subject to limited conditions, including, but not limited to, the Crown Acquisition having closed (or closing concurrently with the making of the Term A-2 Loans, the “Term A-2 Closing Date”). The 2012 Credit Agreement also permits the Company from time to time after the Closing Date to elect to increase the Lenders’ revolving credit commitments or add one or more tranches of additional term loans, subject to the willingness of existing or new lenders to fund such increase or term loans and other customary conditions. The minimum aggregate principal amount of such incremental revolving credit commitment increases or additional term loans may be no less than $25.0 million and the maximum aggregate principal amount of all such incremental revolving credit commitment increases and additional term loans (the “Incremental Facilities Cap”), other than term loans the proceeds of which are applied to repay existing term loans, may be no more than $500.0 million until the Term A-2 Closing Date (see additional discussion below). A portion of the proceeds of the May 2012 Credit Agreement were used to repay the outstanding obligations under the Company’s then existing senior credit facility. The Company uses its revolving credit facility under the 2012 Credit Agreement for general corporate purposes.
The rate of interest on borrowings under the 2012 Credit Agreement is a function of LIBOR plus a margin, the federal funds rate plus a margin, or the prime rate plus a margin. The margin is adjustable based upon the Company’s debt ratio (as defined in the 2012 Credit Agreement). As of August 31, 2012, the LIBOR margin for the Term A Facility and the Revolving Credit Facility was 1.75%; and the LIBOR margin for the Term A-1 Facility was 2.0%.
The changes to the May 2012 Credit Agreement effected by the August 2012 Restatement, among other things, (i) arranged a portion of the debt to finance the Crown Acquisition (the Term A-2 Facility), (ii) facilitated the issuance of the August 2012 Senior Notes and the arrangements under the Escrow Agreement, (iii) modified certain defined terms and covenant requirements, and (iv) adjusted the Incremental Facilities Cap from $750.0 million to $500.0 million until the Term A-2 Closing Date. Subsequent to the Term A-2 Closing Date, the Incremental Facilities Cap will be $750.0 million minus the amount by which the aggregate initial principal amount of the Term A-2 Loans exceeds $325.0 million, if any. If the Term A-2 Loans are never borrowed and the commitments for the Term A-2 Facility are terminated, the Incremental Facilities Cap will revert to $750.0 million.
The obligations under the 2012 Credit Agreement are guaranteed by certain of the Company's U.S. subsidiaries. These obligations are also secured by a pledge of (i) 100% of the ownership interests in certain of the Company’s U.S. subsidiaries and (ii) 55-65% of certain interests of certain of the Company’s foreign subsidiaries.
The Company and its subsidiaries are also subject to covenants that are contained in the 2012 Credit Agreement, including those restricting the incurrence of additional indebtedness (including guarantees of indebtedness), additional liens, mergers and consolidations, the payment of dividends, the making of certain investments, prepayments of certain debt, transactions with affiliates, agreements that restrict the Company’s non-guarantor subsidiaries from paying dividends, and dispositions of property, in each case subject to numerous conditions, exceptions and thresholds. The financial covenants are limited to a minimum interest coverage ratio and a maximum net debt coverage ratio.
As of August 31, 2012, under the 2012 Credit Agreement, the Company had outstanding borrowings under the Term A Facility of $550.0 million bearing an interest rate of 2.0%, Term A-1 Facility of $250.0 million bearing an interest rate of 2.2%, outstanding letters of credit of $15.4 million, and $834.6 million in revolving loans available to be drawn.
As of August 31, 2012, the required principal repayments of the Term A Facility and the Term A-1 Facility for the remaining six months of fiscal 2013 and for each of the five succeeding fiscal years and thereafter are as follows:
In April 2012, the Company transitioned its interest rate swap agreements to a one-month LIBOR base rate versus the then existing three-month LIBOR base rate. Accordingly, the Company entered into new interest rate swap agreements which were designated as cash flow hedges of $500.0 million of the Company’s floating LIBOR rate debt. In addition, the then existing interest rate swap agreements were dedesignated by the Company and the Company entered into additional undesignated interest rate swap agreements for $500.0 million to offset the prospective impact of the newly undesignated interest rate swap agreements. The unrealized losses in AOCI related to the dedesignated interest rate swap agreements are being reclassified from AOCI ratably into earnings in the same period in which the original hedged item is recorded in the Consolidated Statements of Comprehensive Income. Accordingly, the Company has fixed its interest rates on $500.0 million of the Company’s floating LIBOR rate debt at an average rate of 2.8% (exclusive of borrowing margins) through September 1, 2016. For the six months ended August 31, 2012, the Company reclassified net losses of $4.1 million, net of income tax effect, from AOCI to interest expense, net on the Company’s Consolidated Statements of Comprehensive Income. For the three months ended August 31, 2012, the Company reclassified net losses of $2.0 million, net of income tax effect, from AOCI to interest expense, net on the Company’s Consolidated Statements of Comprehensive Income. The Company did not reclassify any amount from AOCI to interest expense, net on its Consolidated Statements of Comprehensive Income for the six months and three months ended August 31, 2011.
Senior notes –
On April 17, 2012, the Company issued $600.0 million aggregate principal amount of 6% Senior Notes due May 2022 (the “April 2012 Senior Notes”). The net proceeds of the offering ($591.4 million) were used for general corporate purposes, including, among others, reducing the outstanding indebtedness under the Company’s prior senior credit facility and common stock share repurchases under the 2013 Authorization (as defined in Note 13). Interest on the April 2012 Senior Notes is payable semiannually on May 1 and November 1 of each year, beginning November 1, 2012. The April 2012 Senior Notes are redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to 100% of the outstanding principal amount plus a make whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 50 basis points. The April 2012 Senior Notes are senior unsecured obligations and rank equally in right of payment to all existing and future senior unsecured indebtedness of the Company. Certain of the Company’s U.S. subsidiaries guarantee the April 2012 Senior Notes, on a senior unsecured basis. As of August 31, 2012, the Company had outstanding $600.0 million aggregate principal amount of April 2012 Senior Notes.
On August 14, 2012, the Company issued $650.0 million aggregate principal amount of 4.625% Senior Notes due March 2023 (the “August 2012 Senior Notes”). The Company intends to use the net proceeds from the offering ($641.4 million) to fund a portion of the Crown Acquisition. Interest on the August 2012 Senior Notes is payable semiannually on March 1 and September 1 of each year, beginning March 1, 2013. The August 2012 Senior Notes are redeemable, in whole or in part, at the option of the Company at any time at a redemption price equal to 100% of the outstanding principal amount plus a make whole payment based on the present value of the future payments at the adjusted Treasury Rate plus 50 basis points. In addition, if the Crown Acquisition is terminated or has not been consummated on or prior to December 30, 2013, all of the August 2012 Senior Notes will be redeemed (the “Special Mandatory Redemption”) at a price equal to 100% of the outstanding principal amount, together with accrued and unpaid interest to the date of the Special Mandatory Redemption. The August 2012 Senior Notes are senior unsecured obligations that rank equally with the Company’s other senior unsecured indebtedness except that the Escrowed Property will be held in escrow and has been pledged to secure the August 2012 Senior Notes until it is used to fund a portion of the purchase price for the Crown Acquisition. Certain of the Company’s U.S. subsidiaries guarantee the August 2012 Senior Notes, on a senior unsecured basis. As of August 31, 2012, the Company had outstanding $650.0 million aggregate principal amount of August 2012 Senior Notes.
As discussed previously, in connection with the issuance of the August 2012 Senior Notes, the Company entered into the Escrow Agreement pursuant to which the Escrowed Property was placed into an escrow account. In accordance with the terms of the Escrow Agreement, the Escrowed Property will be released to the Company upon closing of the Crown Acquisition. If the Crown Acquisition is terminated or has not been consummated on or prior to December 30, 2013, the Escrowed Property will be released for purposes of effecting the Special Mandatory Redemption.
Debt payments –
Principal payments required under long-term debt obligations (excluding unamortized discount of $4.6 million) for the remaining six months of fiscal 2013 and for each of the five succeeding fiscal years and thereafter are as follows:
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