Debt including Capital Lease Obligations

The carrying values of our debt represent amortized cost and are summarized below with estimated fair values:



	March 31, 2014					December 31, 2013					March 31, 2013
	Carrying Value			Estimated Fair Value¹		Carrying Value			Estimated Fair Value¹		Carrying Value			Estimated Fair Value¹
(In thousands)	Carrying Value			Estimated Fair Value¹		Carrying Value			Estimated Fair Value¹		Carrying Value			Estimated Fair Value¹
7.875% Senior Secured Notes due 2021	$	412,249		$	462,000	$	422,174		$	459,000	$	421,956		$	446,000
4.25% Convertible Senior Notes due 2016	167,006			201,000		164,050			194,000		155,701			183,000
ABL Revolver	5,000			5,000		—			—		27,586			27,500
ABL Term Loan	6,000			6,000		6,375			6,000		7,500			7,500
Capital lease obligations²	42,477			42,000		39,025			39,000		690			700
Other debt	6,541			6,000		—			—		—			—
Less current portion	(4,169		)			(2,271		)			(1,755		)
Total long-term debt and capital lease obligations	$	635,104				$	629,353				$	611,678

The fair value of the senior notes is based on observable inputs, which include quoted prices for similar assets or liabilities in an active market and market-corroborated inputs (Level 2). All other debt may be traded on the secondary loan market, and the fair value is based on either the last available trading price, if recent, or trading prices of comparable debt (Level 3). See also Note 9 for discussion of fair value.


²	Capital lease obligations at March 31, 2014 and December 31, 2013 include the borrowings for the salad production and warehousing facility in the Midwest. See further description of the build-to-suit lease below.

7.875% SENIOR SECURED NOTES

In February 2013, Chiquita Brands International, Inc. ("CBII") and its main operating subsidiary, Chiquita Brands L.L.C. ("CBL"), completed the offering of $425 million of 7.875% senior secured notes due February 1, 2021 ("7.875% Notes"). The notes were issued at 99.274% of par, resulting in a recorded discount that will be amortized over the life of the 7.875% Notes to reflect the effective interest rate of 8.0%. The 7.875% Notes were registered with the United States Securities and Exchange Commission through an exchange offer on January 6, 2014, which was completed on February 4, 2014. The 7.875% Notes bear interest of 7.875% per year (payable semi-annually in arrears on February 1 and August 1 of each year). On January 31, 2014, we redeemed $10 million of the 7.875% Notes at 103% of the principal amount (plus interest to the redemption date), incurring less than $1 million of expense in 2014 for call premiums and deferred financing fee write-offs.

4.25% CONVERTIBLE SENIOR NOTES

Our $200 million of 4.25% Convertible Senior Notes due 2016 ("Convertible Notes") are convertible at an initial conversion rate of 44.5524 shares of common stock per $1,000 in principal amount, equivalent to an initial conversion price of approximately $22.45 per share of common stock. The conversion rate is subject to adjustment based on certain dilutive events, including stock splits, stock dividends and other distributions (including cash dividends) in respect of the common stock. Holders of the Convertible Notes may tender their notes for conversion between May 15 and August 14, 2016, in multiples of $1,000 in principal amount, without limitation. Prior to May 15, 2016, holders of the Convertible Notes may tender the notes for conversion only under certain circumstances, in accordance with their terms.

The carrying amounts of the debt and equity components of the Convertible Notes are as follows:



(In thousands)	March 31, 2014			December 31, 2013			March 31, 2013
Principal amount of debt component¹	$	200,000		$	200,000		$	200,000
Unamortized discount	(32,994		)	(35,950		)	(44,299		)
Net carrying amount of debt component	$	167,006		$	164,050		$	155,701
Equity component	$	84,904		$	84,904		$	84,904
Issuance costs and income taxes	(3,210		)	(3,210		)	(3,210		)
Equity component, net of issuance costs and income taxes	$	81,694		$	81,694		$	81,694


¹	As of March 31, 2014, December 31, 2013 and March 31, 2013, the Convertible Notes' "if-converted" value did not exceed their principal amount because our common stock price was below the conversion price of the Convertible Notes.

The interest expense related to the Convertible Notes was as follows:



	Quarter Ended March 31,
(In thousands)	2014		2013
4.25% coupon interest	$	2,125	$	2,125
Amortization of deferred financing fees	117		117
Amortization of discount on the debt component	2,956		2,619
Total interest expense related to the Convertible Notes	$	5,198	$	4,861

ASSET-BASED LENDING FACILITY

CBII and CBL also entered into a 5-year secured asset-based lending facility ("ABL Facility") concurrently with the closing of the 7.875% Notes offering on February 5, 2013. The ABL Facility consists of a revolver (the "ABL Revolver") and a $7.5 million term loan (the "ABL Term Loan"). The ABL Facility matures at the earlier of February 5, 2018 or 60 days prior to the maturity of the 4.25% Convertible Senior Notes due August 15, 2016, unless such notes have been satisfactorily refinanced. The ABL Term Loan requires annual repayments of approximately $2 million. A waiver was obtained on March 10, 2014 to facilitate the combination with Fyffes as described in Note 3.

The ABL Facility has a maximum borrowing capacity of $150 million, with the ABL Revolver subject to a borrowing base calculation based on specified percentages of domestic receivables, certain inventory and certain domestic machinery and equipment.

At March 31, 2014, there was $5 million in borrowings under the ABL Revolver, under which $90 million was available after $23 million was used to support letters of credit.

Loans under the ABL Facility bear interest at:


•	A rate equal to LIBOR plus a margin of from 1.75% to 2.25%, or Base Rate plus a margin of from 0.25% to 0.75%, determined based on levels of borrowing availability reset each fiscal quarter;


•	In the case of the Fixed Asset Sub-Line, a rate equal to LIBOR plus a margin from 2.25% to 2.75%, or Base Rate plus a margin of from 0.75% to 1.25%, determined based on levels of borrowing availability reset each fiscal quarter; and


•	In the case of the ABL Term Loan, a rate equal to LIBOR plus a margin from 2.75% to 3.25%, or Base Rate plus a margin of from 1.25% to 1.75%, determined based on levels of borrowing availability reset each fiscal quarter.

At March 31, 2014, the weighted average interest rate for the ABL Facility was LIBOR plus 2.75%, or 2.90%.

Obligations under the ABL Facility are secured by a first-priority security interest in present and future domestic receivables, inventory, equipment and substantially all other domestic assets that are not under the first-priority security interest of the 7.875% Notes, all subject to certain exceptions and permitted liens and by a second-priority interest in the existing and after acquired material domestic real estate, certain intellectual property and a pledge of 100% of the stock of substantially all of the CBII, CBL and guarantors' domestic subsidiaries and up to 65% of the stock of certain foreign subsidiaries held by CBII, CBL and the guarantors, and proceeds relating thereto. Under the ABL Facility, CBL and non-de minimis domestic subsidiaries are borrowers. The ABL Facility is guaranteed on a full and unconditional basis by CBII and limited domestic subsidiaries of CBII, with the potential for additional guarantees from foreign subsidiaries of CBII.

The ABL Facility contains a fixed charge coverage ratio covenant that only becomes applicable when excess availability (as defined under such facility) is less than $20 million. The ABL Facility also contains a covenant requiring CBII and its subsidiaries to maintain substantially all its cash in accounts that are subject to the control of the collateral agent under the ABL Facility which only becomes applicable when (a) an event of default under the facility occurs and is continuing or (b) excess availability (as defined under such facility) is less than 12.5% of the maximum stated revolver amount thereunder.

The ABL facility also contains other customary affirmative and negative covenants, including limitations on CBII and its subsidiaries' ability to incur indebtedness, create or permit the existence of liens over their assets, engage in certain mergers, asset sales and liquidations, prepay certain indebtedness, pay dividends and other "restricted payments," and engage in transactions with their affiliates, in each case subject to customary exceptions.

At March 31, 2014, we were in compliance with the ABL and its other agreements and expect to remain in compliance for at least the next twelve months.

BUILD-TO-SUIT LEASE FOR MIDWEST SALAD PLANT CONSOLIDATION

In June 2012, we entered into a 20-year lease agreement for a salad production and warehousing facility in the Midwest that replaced three existing facilities in the region. The lease agreement contains two 5-year extension periods. Though the construction costs were financed by the lessor, because of the specialized nature of the facility we acted as the construction agent and were responsible for all construction activity during the construction period. This resulted in us owning the facility for accounting purposes. Construction costs were finalized on March 31, 2014 and an interest rate of 6.3% was used to calculate the capital lease liability and future payments. Lease payments will increase annually based on the Consumer Price Index ("CPI"). Because we were the owner of the assets during construction, the related liability related to this facility prior to the assets being placed into service was recorded in "Other liabilities." The capital lease liability balance related to this facility was $42 million and $38 million at March 31, 2014 and December 31, 2013, respectively, and the amount recorded in "Other liabilities" was $34 million at March 31, 2013.

OTHER DEBT

In the first quarter of 2014, we purchased a group of banana farms in Honduras that were adjacent to farms that we already owned. The purchase included approximately 700 hectares of land, of which nearly 450 hectare are in production, as well as related buildings and equipment. The purchase price was $10 million, of which $3 million, which is included in "Investing: Other, net" in the Condensed Consolidated Statement of Cash Flows, was paid at closing and the remaining $7 million was financed by the sellers. Our debt to the sellers is payable in annual installments over four years. The agreement did not specify an interest rate, and we calculated the debt balance using the effective rate method and an estimated interest rate of 8%. Valuations are in progress and adjustments may occur during the measurement period.