Debt

On March 30, 2006, we entered into a credit agreement with a group of banks (the Credit Agreement). Subsequently, we entered into various amendments which, among other things, added Imation Europe B.V. as a borrower (European Borrower).

On May 18, 2012, we entered into an amendment (the Amendment) to the Credit Agreement (as amended to date, the Amended Credit Agreement). The Amendment modified the Credit Agreement by extending the expiration date of the borrowing arrangement to May 18, 2017, requiring that the equity interests of material foreign subsidiaries be pledged to support the obligations, if any, of the European Borrower, lowered the applicable margin on interest, lowered the Company's minimum required Consolidated Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) to be maintained as well as provided for certain other less significant changes.

The Amended Credit Agreement includes a senior revolving credit facility that allows for the borrowing of amounts up to a maximum of $170 million, including sublimits of $140 million in the United States and $30 million in Europe. Borrowings in both the United States and Europe are limited to the lesser of the sublimit(s) and the borrowing base as defined in the Amended Credit Agreement and are payable upon expiration of the Amended Credit Agreement or immediately, but only to the extent the applicable sublimit(s) are reduced to an amount less than the amount borrowed at that time. Our borrowing base is calculated each quarter unless our outstanding loan amount is greater than $5.0 million in which our borrowing base is calculated monthly. Our borrowing base is based on our amounts of receivables, inventories and other factors that influence the borrowing base and, to the extent any outstanding borrowing exceeds the borrowing base, any such excess is due and payable immediately.

As of December 31, 2013, we had $20.0 million of borrowings outstanding under the Amended Credit Agreement, all of which was borrowed in the United States and bore interest at a rate of 2.24 percent as of December 31, 2013. As of December 31, 2013, our total remaining borrowing capacity under the Amended Credit Agreement was $30.1 million, consisting of $19.0 million in the United States and $11.1 million in Europe.

Prior to August 15, 2012, borrowings bore interest at an interest rate equal to (1) the Eurodollar Rate (as defined in the Amended Credit Agreement) plus 2.00 percent or (2) the Base Rate (as defined in the Amended Credit Agreement) plus 1.00 percent. After August 15, 2012, the applicable margins for the Eurodollar Rate and the Base Rate are subject to adjustments based on average daily availability (as defined in the Amended Credit Agreement).

Our U.S. obligations under the Amended Credit Agreement are guaranteed by the material domestic subsidiaries of Imation Corp. (the Guarantors) and are secured by a first priority lien (subject to customary exceptions) on the real property comprising Imation Corp.’s corporate headquarters and all of the personal property of Imation Corp., its subsidiary Imation Enterprises Corp., which is also an obligor under the Amended Credit Agreement, and the Guarantors. Borrowings under the U.S. portion of the Credit Facility are limited to the lesser of (a) $140 million and (b) the “U.S. borrowing base.” The U.S. borrowing base is equal to the following:


•	up to 85 percent of eligible accounts receivable; plus


•	up to the lesser of 65 percent of eligible inventory or 85 percent of the appraised net orderly liquidation value of eligible inventory; plus


•	up to 60 percent of the appraised fair market value of eligible real estate (the Original Real Estate Value), such Original Real Estate Value to be reduced each calendar month by 1/120th, provided, that the Original Real Estate Value shall not exceed $40 million; plus


•	such other classes of collateral as may be mutually agreed upon and at advance rates as may be determined by the Agent; minus


•	such reserves as the Agent may establish in good faith.

Our European obligations under the Credit Agreement are secured by a first priority lien on substantially all of the material personal property of the European Borrower. Borrowings under the European portion of the Credit Facility are limited to the lesser of (a) $30 million and (b) the “European borrowing base.” The European borrowing base calculation is fundamentally the same as the U.S. borrowing base, subject to certain differences to account for European law and other similar issues.

The Amended Credit Agreement contains covenants which are customary for similar credit agreements, including covenants related to financial reporting and notification, payment of indebtedness, taxes and other obligations; compliance with applicable laws; and limitations regarding additional liens, indebtedness, certain acquisitions, investments and dispositions of assets. The Amended Credit Agreement contains a conditional financial covenant that requires Imation Corp. to have a Consolidated Fixed Charge Coverage Ratio (as defined in the Amended Credit Agreement) of not less than 1.00 or a liquidity requirement of $30.0 million of domestic borrowing availability. We were in compliance with the liquidity requirement as of December 31, 2013 and our U.S. availability discussed above considers the $30 million liquidity requirement.

On July 16, 2013, we entered into an additional credit agreement for a revolving credit facility with a lender in Japan with Imation Corporation Japan as the borrower and Imation Corp. as the guarantor. We intend to use the credit facility for general operating purposes. The credit agreement is a three year asset-based revolving credit facility with a borrowing base consistent with our existing Credit Agreement that allows for the borrowing of amounts up to 3.0 billion Japanese Yen, or approximately $30.0 million. Borrowings under the credit facility will bear interest at an interest rate equal to the base rate based on LIBOR or TIBOR plus the applicable margins provided for in the credit agreement. The credit agreement contains financial covenants applicable to Imation Corporation Japan including a fixed charge coverage ratio requirement. As of December 31, 2013, our borrowing capacity under this arrangement was $12.4 million and we did not have any borrowings outstanding under this credit facility. We are in compliance with all covenant requirements as of December 31, 2013.

During 2013 we capitalized $0.4 million of debt issuance costs related to the Japan Credit Agreement and during 2012 we capitalized $2.6 million of debt issue costs related to the Amended Credit Agreement. These costs were recorded to Other assets in our Consolidated Balance Sheets as of December 31, 2013 and 2012 and are being amortized over the term of each of the credit agreements.

As of December 31, 2013 and 2012 we had outstanding standby letters of credit of $0.7 million and $0.4 million, respectively. The outstanding standby letters of credit are required by our insurance companies to cover potential deductibles and reduce our allowed borrowing capacity under the Amended Credit Agreement. Additionally, as of December 31, 2013 we had a $6.0 million overdraft line of credit available in Japan.

Our interest expense, which includes letter of credit fees, facility fees, commitment fees under the Amended Credit Agreement and amortization of debt issuance costs, for 2013, 2012 and 2011 was $2.5 million, $2.9 million and $3.7 million, respectively. Cash paid for interest for 2013, 2012 and 2011, relating to both continuing and discontinued operations, was $1.7 million, $2.4 million and $2.7 million, respectively.