Debt

3 Months Ended

Dec. 27, 2013

Debt as of December 27, 2013 and September 27, 2013 was as follows ($ in millions):



	December 27, 2013			September 27, 2013
Senior secured notes due January 1, 2018	$	369		$	410
Asset-based Credit Facility	118			59
Other	3			3
Total debt	490			472
Current portion	(121		)	(62		)
Long-term debt	$	369		$	410

On December 22, 2010, Atkore International issued senior secured notes (the “Notes”) in the principal amount of $410 million, due on January 1, 2018, with a coupon of 9.875%. The obligations under the Notes are senior to unsecured indebtedness of the Company. Interest on the Notes is payable on a semi-annual basis, commencing on July 1, 2011. Atkore International’s obligations under the Notes are fully and unconditionally guaranteed on a stand-alone senior secured basis by the Company (the direct parent of Atkore International) and are fully and unconditionally guaranteed on a joint and several senior secured basis by each of Atkore International’s domestic subsidiaries that are a borrower or guarantor under the Credit Facility. The Notes are redeemable at the Company’s option in whole or in part on or after January 1, 2014, with not less than 30 or more than 60 days notice, for an amount to be determined pursuant to provisions set forth in the indenture governing the Notes. In addition, during any 12-month period prior to January 1, 2014, the Company had the right to redeem up to 10% of the original aggregate principal amount of the Notes at a redemption price of 103% of par, plus accrued interest. In the event that Atkore International raised additional equity prior to January 1, 2014, then subject to the restrictions in the Notes, Atkore International had the right to redeem up to 35% of the Notes at 109.875% of par, plus accrued and unpaid interest up to the redemption date. The Company also had the right to redeem the Notes prior to January 1, 2014, in whole or in part at par plus an applicable premium, as defined in the indenture, and accrued interest. The Company redeemed $41 million of the Notes on November 25, 2013 under the terms of the Indenture at a price of 103% of the par value of the redemption amount plus interest accrued to the date of redemption. The redemption of the Notes resulted in a loss on extinguishment of debt of $3 million, including an early redemption premium of $1 million and a write-off of $2 million of unamortized debt issuance costs related to the Notes. The Notes contain covenants typical to this type of financing, including limitations on indebtedness, restricted payments including dividends, liens, restrictions on distributions from restricted subsidiaries, sales of assets, affiliate transactions, mergers and consolidations. The Notes also contain customary events of default typical to this type of financing, including without limitation, failure to pay principal and/or interest when due, failure to observe covenants, certain events of bankruptcy, the rendering of certain judgments, or the loss of any guarantee.

On October 23, 2013, Atkore International, a subsidiary of the Company, entered into the Second Amendment to the Credit Agreement and First Amendment to and Reaffirmation of the Guarantee and Collateral Agreement of the Credit Agreement, dated as of December 22, 2010. The amendment to the Credit Facility increased the aggregate commitments of the lenders to $300 million, reduced interest spreads and amended certain other terms and provisions. Availability under the Credit Agreement is subject to a borrowing base equal to the sum of 85% of eligible accounts receivable plus 80% of eligible inventory of each borrower and guarantor, subject to certain limitations. The amendment to the Credit Facility resulted in a write off of less than $1 million of unamortized deferred costs and an additional $1 million of costs paid to the creditor and third-party that will be amortized over the term of the amended Credit Facility. As of December 27, 2013 and September 27, 2013, $118 million and $59 million were drawn under the Credit Facility, respectively. The Credit Facility is guaranteed by the Company and the U.S. operating companies owned by Atkore International. The Company’s availability under the Credit Facility was $159 million and $177 million as of December 27, 2013 and September 27, 2013, respectively. The interest rate on the Credit Facility is LIBOR plus an applicable margin ranging from 1.50% to 2.00%, or an alternate base rate for U.S. Dollar denominated borrowings plus an applicable margin ranging from 0.50% to 1.00%. The Credit Facility matures on October 23, 2017, however if no more than $30 million of the Senior Notes remains outstanding and an availability reserve is established against the borrowing base, the maturity date will be October 23, 2018. The Credit Facility contains customary representations and warranties and customary affirmative and negative covenants. Affirmative covenants include, but are not limited to, the timely delivery of quarterly and annual financial statements, certifications to be made by the Company, payment of obligations, maintenance of corporate existence and insurance, notices, compliance with environmental laws, and the grant of liens on after acquired property. The negative covenants include, but are not limited to, the following: limitations on indebtedness, dividends and distributions, investments, prepayments or redemptions of subordinated indebtedness, amendments of subordinated indebtedness, transactions with affiliates, asset sales, mergers, consolidations and sales of all or substantially all assets, liens, negative pledge clauses, changes in fiscal periods, changes in line of business and changes in charter documents. Additionally, if the availability under the Credit Facility falls below certain levels, the Company would subsequently be required to maintain a minimum fixed charge coverage ratio.

The Company may from time to time repurchase or otherwise retire or extend the Company’s debt and/or take other steps to reduce the Company’s debt or otherwise improve the Company’s financial position. These actions may include open market debt repurchases, negotiated repurchases, and other retirements of outstanding debt and/or opportunistic refinancing of debt. The amount of debt that may be repurchased or otherwise retired or refinanced, if any, will depend on market conditions, trading levels of the Company’s debt, the Company’s cash position, compliance with debt covenants and other considerations. Affiliates of the Company may also purchase the Company’s debt from time to time, through open market purchases or other transactions. In such cases, the Company’s debt would not be retired, in which case the Company would continue to pay interest in accordance with the terms of the debt, and the Company would continue to reflect the debt as outstanding in its condensed consolidated statements of financial position.

As of December 27, 2013, the fair value of the floating rate borrowings under the Credit Facility approximated its carrying amount based on the short-term nature of such debt. The fair value of the Company’s Notes was $398 million as of December 27, 2013. In determining the fair value of its long-term debt, the Company used the trading value amongst financial institutions for the Notes, which were classified within level 1 of the fair value hierarchy.

In the fourth quarter of fiscal year 2013, the Company entered into foreign exchange forward options to mitigate the income statement effect of changes caused by fluctuations in currency rates in the fair value of third-party receivables denominated in foreign currency related to the divestiture of the Brazil business. Gains and losses on these derivative instruments are recorded through earnings. As of December 27, 2013, the fair value of the foreign exchange forward options is $1 million and is included in prepaid expenses and other current assets in the consolidated balance sheet and the loss on the foreign exchange forward options for the three months ended December 27, 2013 was less than $1 million and was recorded in selling, general, and administrative on the statements of operations.

The following table summarizes the notional amount and fair value of the Company’s financial instruments at December 27, 2013 and September 27, 2013 ($ in millions):

December 27, 2013

September 27, 2013

Level

Notional Amount

Fair Value

Notional Amount

Fair Value

Foreign exchange forward options

Other than the foreign exchange forward options, the Company’s financial instruments consist primarily of cash and cash equivalents, accounts receivable, accounts payable. The fair value of cash and cash equivalents, accounts receivable, and accounts payable approximated book value as of December 27, 2013 and September 27, 2013 due to their short-term maturities.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

Atkore International Holdings Inc. 10-Q