Long-Term Debt

9 Months Ended

Sep. 28, 2019

Long-Term Debt [Abstract]

Long-Term Debt

Note 7 – Long-Term Debt

Long-term debt consists of the following:

	September 28, 2019			December 31, 2018
Credit facility	$	-		$	-
Convertible senior notes, due 2025		505,591			495,203
Convertible senior debentures, due 2040		146			539
Convertible senior debentures, due 2041		8,175			12,812
Convertible senior debentures, due 2042		-			923
Deferred financing costs		(17,650	)		(14,968	)
		496,262			494,509
Less current portion		-			-
	$	496,262		$	494,509

Credit Facility

On June 5, 2019, the Company entered into a new credit agreement with a consortium of banks led by JPMorgan Chase Bank, N.A., as administrative agent, and the lenders (the "New Credit Facility"), which provides an aggregate commitment of $750,000 of revolving loans available until June 5, 2024.  The New Credit Facility replaces Vishay’s previous credit agreement that provided for an aggregate commitment of $640,000, and that was scheduled to mature on December 10, 2020.  The New Credit Facility also provides for the ability of Vishay to request up to $300,000 of incremental facilities, subject to the satisfaction of certain conditions, which could take the form of additional revolving commitments, incremental “term loan A” or “term loan B” facilities, or incremental equivalent debt.

Borrowings under the New Credit Facility bear interest at LIBOR plus an interest margin.  The applicable interest margin is based on Vishay's leverage ratio.  Based on Vishay's current leverage ratio, borrowings bear interest at LIBOR plus 1.50%, the same as pursuant to the previous credit agreement.  Vishay also pays a commitment fee, also based on its leverage ratio, on undrawn amounts.  The undrawn commitment fee, based on Vishay's current leverage ratio, is 0.25% per annum, an improvement of 5 basis points over the previous credit agreement. 

The New Credit Facility allows an unlimited amount of defined “Investments,” which include certain intercompany transactions and acquisitions, provided the Company's pro forma leverage ratio is equal to or less than 2.75 to 1.00.  If the Company's pro forma leverage ratio is greater than 2.75 to 1.00, such Investments are subject to certain limitations.

The New Credit Facility also allows an unlimited amount of defined "Restricted Payments," which include cash dividends and share repurchases, provided the Company's pro forma leverage ratio is equal to or less than 2.50 to 1.00.  If the Company's pro forma leverage ratio is greater than 2.50 to 1.00, the New Credit Facility allows such payments up to $100,000 per annum (subject to a cap of $300,000 for the term of the facility, with up to $25,000 of any unused amount of the $100,000 per annum base available for use in the next succeeding calendar year).

Similar to the previous credit agreement, the borrowings under the New Credit Facility are secured by a lien on substantially all assets, including  accounts receivable, inventory, machinery and equipment, and general intangibles (but excluding real estate, intellectual property registered or licensed solely for use in, or arising solely under the laws of, any country other than the United States, assets located solely outside of the United States and deposit and securities accounts), of Vishay and certain significant subsidiaries located in the United States, and pledges of stock in certain significant domestic and foreign subsidiaries; and are guaranteed by certain significant subsidiaries.  

The New Credit Facility continues to limit or restrict the Company and its subsidiaries, from, among other things, incurring indebtedness, incurring liens on its respective assets, making investments and acquisitions (assuming the Company’s pro forma leverage ratio is greater than 2.75 to 1.00), making asset sales, and paying cash dividends and making other restricted payments (assuming the Company's pro forma leverage ratio is greater than 2.50 to 1.00), and requires the Company to comply with other covenants, including the maintenance of specific financial ratios.

Similar to the previous credit agreement, the New Credit Facility also contains customary events of default, including, but not limited to, failure to pay principal or interest, failure to pay or default under other material debt, material misrepresentation or breach of warranty, violation of certain covenants, a change of control, the commencement of  bankruptcy proceedings, the insolvency of Vishay or certain of its significant subsidiaries, and the rendering of a judgment in excess of $50,000 against Vishay or its subsidiaries.  Upon the occurrence of an event of default under the New Credit Facility, Vishay's obligations under the credit facility may be accelerated and the lending commitments under the credit facility may be terminated.

Convertible Debt Instruments

The following table summarizes some key facts and terms regarding the outstanding convertible debt instruments as of September 28, 2019:

	Convertible Senior Notes Due 2025			Convertible Senior Debentures Due 2040			Convertible Senior Debentures Due 2041
Issuance date	June 12, 2018			November 9, 2010			May 13, 2011
Maturity date	June 15, 2025			November 15, 2040			May 15, 2041
Principal amount as of September 28, 2019	$	600,000		$	350		$	20,790
Cash coupon rate (per annum)		2.25	%		2.25	%		2.25	%
Nonconvertible debt borrowing rate at issuance (per annum)		5.50	%		8.00	%		8.375	%
Conversion rate effective September 11, 2019 (per $1 principal amount)		31.7924			79.6235			58.1051
Effective conversion price effective September 11, 2019 (per share)	$	31.45		$	12.56		$	17.21
130% of the conversion price (per share)	$	40.89		$	16.33		$	22.37
Call date		n/a		November 20, 2020			May 20, 2021

The terms of the convertible senior debentures due 2040 and due 2041 are generally congruent.  The terms of the fully retired convertible senior debentures due 2042 were also generally congruent to the convertible senior debentures due 2040 and due 2041.

Prior to three months before the maturity date, the holders may convert their convertible senior debentures due 2040 and due 2041 only under the following circumstances: (1) during any fiscal quarter after the first full quarter subsequent to issuance, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the debentures falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; (3) Vishay calls any or all of the debentures for redemption, at any time prior to the close of business on the third scheduled trading day immediately preceding the redemption date; or (4) upon the occurrence of specified corporate events.  The convertible senior debentures due 2040 and due 2041 are not currently convertible.

Prior to December 15, 2024, the holders of the convertible senior notes due 2025 may convert their notes only under the following circumstances: (1) during any fiscal quarter after the fiscal quarter ending September 29, 2018, if the sale price of Vishay common stock reaches 130% of the conversion price for a specified period; (2) the trading price of the notes falls below 98% of the product of the sale price of Vishay's common stock and the conversion rate for a specified period; or (3) upon the occurrence of specified corporate transactions.

The quarterly cash dividend program of the Company results in adjustments to the conversion rate and effective conversion price for the convertible debt instruments effective as of the ex-dividend date of each cash dividend.  The conversion rate and effective conversion price for the convertible senior notes due 2025 is adjusted for quarterly cash dividends to the extent such dividends exceed $0.085 per share of common stock.

GAAP requires an issuer to separately account for the liability and equity components of the instrument in a manner that reflects the issuer’s nonconvertible debt borrowing rate when interest costs are recognized in subsequent periods.  The resulting discount on the debt is amortized as non-cash interest expense in future periods.

The carrying values of the liability and equity components of the convertible debt instruments are reflected in the Company’s consolidated condensed balance sheets as follows:

	Principal amount of the debt instruments		Unamortized discount			Embedded derivative		Carrying value of liability component		Equity component (including temporary equity) -net carrying value
September 28, 2019
Convertible senior notes due 2025	$	600,000		(94,409	)		-	$	505,591	$	85,262
Convertible senior debentures due 2040 and due 2041	$	21,140		(12,829	)		10	$	8,321	$	8,767
Total	$	621,140	$	(107,238	)	$	10	$	513,912	$	94,029
December 31, 2018
Convertible senior notes due 2025	$	600,000		(104,797	)		-	$	495,203	$	85,262
Convertible senior debentures due 2040, due 2041, and due 2042	$	36,556		(22,352	)		70	$	14,274	$	15,092
Total	$	636,556	$	(127,149	)	$	70	$	509,477	$	100,354

Interest is payable on the convertible debt instruments semi-annually at the cash coupon rate; however, the remaining debt discount is being amortized as additional non-cash interest expense using an effective annual interest rate equal to the Company’s estimated nonconvertible debt borrowing rate at the time of issuance.  In addition to ordinary interest, contingent interest will accrue in certain circumstances relating to the trading price of the convertible senior debentures due 2040 and due 2041 and under certain other circumstances, beginning ten years subsequent to their respective issuance.  The convertible senior notes due 2025 do not possess contingent interest features.

Interest expense related to the convertible debt instruments is reflected on the consolidated condensed statements of operations for the fiscal quarters ended:

	Contractual coupon interest		Non-cash amortization of debt discount		Non-cash amortization of deferred financing costs		Non-cash change in value of derivative liability			Total interest expense related to the debt instruments
September 28, 2019
Convertible senior notes due 2025	$	3,375		3,520		454		-		$	7,349
Convertible senior debentures	$	118		53		2		(10	)	$	163
Total	$	3,493	$	3,573	$	456	$	(10	)	$	7,512
September 29, 2018
Convertible senior notes due 2025	$	3,375		3,334		454		-		$	7,163
Convertible senior debentures	$	1,609		668		23		110		$	2,410
Total	$	4,984	$	4,002	$	477	$	110		$	9,573

Interest expense related to the convertible debt instruments is reflected on the consolidated condensed statements of operations for the nine fiscal months ended:

	Contractual coupon interest		Non-cash amortization of debt discount		Non-cash amortization of deferred financing costs		Non-cash change in value of derivative liability			Total interest expense related to the debt instruments
September 28, 2019
Convertible senior notes due 2025	$	10,125		10,388		1,362		-		$	21,875
Convertible senior debentures	$	385		170		6		(32	)	$	529
Total	$	10,510	$	10,558	$	1,368	$	(32	)	$	22,404
September 29, 2018
Convertible senior notes due 2025	$	4,088		3,890		605		-		$	8,583
Convertible senior debentures	$	7,536		3,076		109		115		$	10,836
Total	$	11,624	$	6,966	$	714	$	115		$	19,419

The Company used cash to repurchase $960, $12,288 and $2,168 principal amounts of convertible senior debentures due 2040, due 2041, and due 2042, respectively, in the first fiscal quarter of 2019.  The net carrying value of the debentures repurchased were $396, $4,770, and $924, respectively.  In accordance with the authoritative accounting guidance for convertible debentures, the aggregate repurchase payment of $22,695 was allocated between the liability ($7,311) and equity (including temporary equity, $15,384) components of the convertible debentures, using the Company's nonconvertible debt borrowing rate at the time of the repurchase.  As a result, the Company recognized a loss on extinguishment of convertible debentures of $1,307, including the write-off of a portion of unamortized debt issuance costs.  The convertible senior debentures due 2042 have been fully repurchased, and the trustee has confirmed that the Company has satisfied and discharged its obligations under the indenture governing the convertible senior debentures due 2042.