Quarterly report pursuant to Section 13 or 15(d)

Debt

v2.4.0.6
Debt
9 Months Ended
Dec. 31, 2011
Debt  
Debt

Note 2. Debt

 

A summary of debt is as follows (amounts in thousands):

 

 

 

December 31,

 

March 31,

 

 

 

2011

 

2011

 

 

 

 

 

 

 

10.5% Senior Notes, net of discount of $2,584 and $2,792 as of December 31, 2011 and March 31, 2011, respectively

 

$

227,416

 

$

227,208

 

Convertible Notes, net of discount of $1,569 as of March 31, 2011

 

 

39,012

 

Other

 

3,650

 

7,096

 

Total debt

 

231,066

 

273,316

 

Current maturities

 

(1,219

)

(42,101

)

Total long-term debt

 

$

229,847

 

$

231,215

 

 

The line item “Interest expense” on the Condensed Consolidated Statements of Operations for the quarters and nine months ended December 31, 2011 and 2010, is as follows (amounts in thousands):

 

 

 

Quarters Ended

 

Nine Months Ended

 

 

 

December 31,

 

December 31,

 

 

 

2011

 

2010

 

2011

 

2010

 

Contractual interest expense

 

$

6,189

 

$

6,546

 

$

18,815

 

$

18,584

 

Amortization of debt issuance costs

 

274

 

262

 

829

 

867

 

Amortization of debt discount

 

573

 

948

 

2,074

 

3,097

 

Total interest expense

 

$

7,036

 

$

7,756

 

$

21,718

 

$

22,548

 

 

10.5% Senior Notes

 

On May 5, 2010, the Company completed a private placement of $230.0 million in aggregate principal amount of the Company’s 10.5% Senior Notes due 2018 (the “10.5% Senior Notes”).  The private placement of the 10.5% Senior Notes resulted in proceeds to the Company of $222.2 million. The Company used a portion of the proceeds of the private placement to repay all of the outstanding indebtedness under a credit facility with K Financing, a EUR 60 million credit facility and a EUR 35 million credit facility with UniCredit Corporate Banking S.pA. (“UniCredit”) and a term loan with a subsidiary of Vishay Intertechnology, Inc. The Company used a portion of the remaining proceeds to fund a previously announced tender offer to purchase $40.5 million in aggregate principal amount of the 2.25% Convertible Senior Notes and to pay costs incurred in connection with the private placement, the tender offer and the foregoing repayments. Debt issuance costs related to the 10.5% Senior Notes, net of amortization, were $5.6 million as of December 31, 2011; these costs are being amortized over the term of the 10.5% Senior Notes.

 

On October 26, 2010, the Company filed a Form S-4 to offer, in exchange for the outstanding 10.5% Senior Notes due 2018 (“Old Notes”), up to $230.0 million in aggregate principal amount of 10.5% Senior Notes due 2018 and the guarantees thereof which had been registered under the Securities Act of 1933, as amended. The Form S-4 was declared effective on December 14, 2010 and on January 13, 2011 the Company completed the exchange for all of the Old Notes.

 

The Company had interest payable related to the 10.5% Senior Notes included in the line item “Accrued expenses” on its Condensed Consolidated Balance Sheets of $4.0 million and $10.1 million at December 31, 2011 and March 31, 2011, respectively.

 

Revolving Line of Credit

 

On September 30, 2010, KEMET Electronics Corporation (“KEC”) and KEMET Electronics Marketing (S) Pte Ltd. (“KEMET Singapore”) (each a “Borrower” and, collectively, the “Borrowers”) entered into a Loan and Security Agreement (the “Loan and Security Agreement”), with Bank of America, N.A, as the administrative agent and the initial lender. The Loan and Security Agreement provides a $50 million revolving line of credit, which is bifurcated into a U.S. facility (for which KEC is the Borrower) and a Singapore facility (for which KEMET Singapore is the Borrower).  The size of the U.S. facility and Singapore facility can fluctuate as long as the Singapore facility does not exceed $30 million and the total facility does not exceed $50 million.  A portion of the U.S. facility and of the Singapore facility can be used to issue letters of credit.  The facilities expire on September 30, 2014.

 

Debt issuance costs related to the Loan and Security Agreement, net of amortization, were $1.0 million and $1.3 million as of December 31, 2011 and March 31, 2011, respectively.  These costs are being amortized over the term of the Loan and Security Agreement.  There were no borrowings against the Loan and Security Agreement as of December 31, 2011 or March 31, 2011.

 

Convertible Notes

 

In November 2006, the Company sold and issued its 2.25% Convertible Senior Notes due 2026 (the “Convertible Notes”) which are unsecured obligations and rank equally with the Company’s existing and future unsubordinated and unsecured obligations and are junior to any of the Company’s future secured obligations to the extent of the value of the collateral securing such obligations. In connection with the issuance and sale of the Convertible Notes, the Company entered into an indenture (the “Convertible Notes Indenture”) dated as of November 1, 2006, with Wilmington Trust Company, as trustee.

 

The Convertible Notes bore interest at a rate of 2.25% per annum, payable in cash semi-annually in arrears on each May 15 and November 15. The Convertible Notes were convertible into (i) cash in an amount equal to the lesser of the principal amount of the Convertible Notes and the conversion value of the Convertible Notes on the conversion date and (ii) cash or shares of the Company’s common stock (“Common Stock”) or a combination of cash and shares of the Common Stock, at the Company’s option, to the extent the conversion value at that time exceeded the principal amount of the Convertible Notes, at any time prior to the close of business on the business day immediately preceding the maturity date of the Convertible Notes, unless the Company had redeemed or purchased the Convertible Notes, subject to certain conditions. The conversion rate was 34.364 shares of common stock per $1,000 principal amount of the Convertible Notes, which represented a conversion price of approximately $29.10 per share, subject to adjustments.

 

The terms of the Convertible Notes were governed by the Convertible Notes Indenture. The Convertible Notes were to mature on November 15, 2026 unless earlier redeemed, repurchased or converted. The Company was entitled to redeem the Convertible Notes for cash, either in whole or in part, any time after November 20, 2011 at a redemption price equal to 100% of the principal amount of the Convertible Notes to be redeemed plus accrued and unpaid interest, including additional interest, if any, up to but not including the date of redemption. In addition, holders of the Convertible Notes had the right to require the Company to repurchase for cash all or a portion of their Convertible Notes on November 15, 2011, 2016 and 2021, at a repurchase price equal to 100% of the principal amount of the Convertible Notes to be repurchased plus accrued and unpaid interest, if any, in each case, up to but not including, the date of repurchase.

 

On November 15, 2011, holders of the Convertible Notes exercised their right to require the Company to repurchase their Convertible Notes, as such, $36.5 million of Convertible Notes were extinguished at 100% of the principal amount of the Convertible Notes plus accrued and unpaid interest.

 

On May 17, 2010, $40.5 million in aggregate principal amount of the Convertible Notes was extinguished.  The extinguishment resulted in $1.6 million loss on early extinguishment of debt. The calculation of the loss is as follows (amounts in thousands):

 

Reacquisition price:

 

 

 

Cash paid

 

$

37,867

 

Tender offer fees

 

207

 

 

 

38,074

 

Extinguished debt:

 

 

 

Carrying amount of debt

 

36,770

 

Unamortized debt cost

 

(248

)

 

 

36,522

 

 

 

 

 

Net loss

 

$

(1,552

)

 

Platinum Credit Facility

 

On May 5, 2009, the Company executed a credit facility with K Financing, an affiliate of Platinum Equity Capital Partners II, L.P. (the “Platinum Credit Facility”). The Platinum Credit Facility consisted of a term loan of $37.8 million (“Platinum Term Loan”), a line of credit loan (“Platinum Line of Credit Loan”) that could be borrowed from time to time (but not reborrowed after being repaid) of up to $12.5 million and a working capital loan (“Platinum Working Capital Loan”) of up to $12.5 million. On May 5, 2010, the Company applied a portion of the proceeds of the 10.5% Senior Notes to extinguish the Platinum Term Loan, the Platinum Line of Credit Loan, and the Platinum Working Capital Loan.  The extinguishment of the Platinum Credit Facility resulted in a $33.3 million loss on early extinguishment of debt due to the significant debt discount allocated to the Platinum Credit Facility upon issuance.

 

The calculation of the loss is as follows (amounts in thousands):

 

Reacquisition price:

 

 

 

Cash paid

 

$

57,861

 

Success fee

 

5,000

 

 

 

62,861

 

Extinguished debt:

 

 

 

Carrying amount of debt

 

32,135

 

Carrying amount of success fee

 

2,001

 

Unamortized debt cost

 

(4,619

)

 

 

29,517

 

 

 

 

 

Net loss

 

$

(33,344

)

 

UniCredit Credit Facility

 

As of March 31, 2010, the Company had two Senior Facility Agreements outstanding with UniCredit.  As of March 31, 2010, Facility A had EUR 53.2 million ($71.7 million) outstanding and Facility B had EUR 33.0 million ($44.5 million) outstanding.

 

On May 5, 2010, the Company applied a portion of the proceeds of the 10.5% Senior Notes to extinguish Facility A and Facility B.  The extinguishment resulted in a $3.4 million loss on early extinguishment of debt. The calculation of the loss is as follows (amounts in thousands):

 

Reacquisition price:

 

 

 

Cash paid

 

$

104,683

 

Extinguished debt:

 

 

 

Carrying amount of debt

 

104,674

 

Unamortized debt cost

 

(3,343

)

 

 

101,331

 

 

 

 

 

Net loss

 

$

(3,352

)