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Debt

6 Months Ended

Jun. 29, 2012

9. Debt

The components of debt and a reconciliation to the carrying amount of long-term debt is presented in the table below.


	June 29, 2012			December 31, 2011
	(in millions)
L-3 Communications:
Borrowings under Amended and Restated Revolving Credit Facility⁽¹⁾	$	—		$	—
3.95% Senior Notes due 2016		500			500
5.20% Senior Notes due 2019		1,000			1,000
4.75% Senior Notes due 2020		800			800
4.95% Senior Notes due 2021		650			650
6³/ ₈% Senior Subordinated Notes due 2015		500			500

Subtotal		3,450			3,450

L-3 Holdings:
3% Convertible Contingent Debt Securities due 2035⁽²⁾		689			689

Principal amount of long-term debt		4,139			4,139
Less: Unamortized discounts		(13	)		(14	)

Carrying amount of long-term debt	$	4,126		$	4,125

⁽¹⁾

The Company’s three-year revolving credit facility, which was amended and restated on February 3, 2012 and matures on February 3, 2017, provides for total aggregate borrowings of up to $1 billion. At June 29, 2012, available borrowings under the Amended and Restated Revolving Credit facility were $996 million after reductions for outstanding letters of credit of $4 million.

⁽²⁾

Under select conditions, including if L-3 Holdings common stock price is more than 120% (currently $110.60) of the then current conversion price (currently $92.17) for a specified period, the conversion feature of the CODES will require L-3 Holdings, upon conversion, to pay the holders of the CODES the principal amount in cash, and if the settlement amount exceeds the principal amount, the excess will be settled in cash or stock or a combination thereof, at the Company’s option. At the current conversion price of $92.17, the aggregate consideration to be delivered upon conversion would be determined based on 7.0 million shares of L-3 Holdings’ common stock. See Note 10 to the audited consolidated financial statements for the year ended December 31, 2011, included in the Company’s Annual Report on Form 10-K for additional information regarding the CODES, including conditions for conversion. L-3 Holdings’ closing stock price on August 1, 2012 was $69.87 per share. Through February 1, 2011, the effective interest rate on the CODES was 6.33% and interest expense related to both the contractual coupon interest and amortization of the discount on the liability component. The Company amortized the discount on the liability component of the CODES through February 1, 2011 which was the first date that the holders of the CODES had a contractual right to require L-3 Holdings to repurchase the CODES. Interest expense for the CODES after February 1, 2011 relates only to the contractual coupon interest. Interest expense recognized was $5 million for the second quarterly periods ended June 29, 2012 and July 1, 2011, respectively, and $10 million and $12 million for the first half periods ended June 29, 2012 and July 1, 2011, respectively. The carrying amount of the equity component (conversion feature) of the CODES was $64 million at June 29, 2012 and December 31, 2011.

On February 3, 2012, L-3 Communications amended and restated its $1 billion Revolving Credit Facility, which extended the expiration date to February 3, 2017. See Note 10 to the audited consolidated financial statements for the year ended December 31, 2011, included in the Company’s Annual Report on Form 10-K for additional information regarding the Amended and Restated Revolving Credit Agreement.

On July 26, 2012 (the redemption date), L-3 Communications utilized a portion of the proceeds from the spin-off of Engility to redeem $250 million in aggregate principal of the 2015 Notes at a redemption price of 102.125% of the principal amount redeemed, plus accrued and unpaid interest, up to but not including the redemption date. In connection with the redemption of the 2015 Notes, the Company will record a debt retirement charge of approximately $8 million in the quarter ending September 28, 2012.

- 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.

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