XML 78 R23.htm IDEA: XBRL DOCUMENT

Long-Term Debt

6 Months Ended

Mar. 31, 2012

17. Long-Term Debt

Long-Term Debt, net of discounts where applicable, is summarized as follows (in millions):

	March 31,			September 30,
	2012			2011
8-3/4 percent notes due 2012⁽¹⁾	$	—		$	84
8-1/8 percent notes due 2015		250			250
10-5/8 percent notes due 2018		246			246
4.625 percent convertible notes due 2026⁽²⁾		300			300
4.0 percent convertible notes due 2027⁽²⁾		200			200
Lines of credit and other		12			8
Accounts receivable securitization		19			—
Unamortized gain on interest rate swap termination		11			14
Unamortized discount on convertible notes		(63	)		(68	)
Subtotal		975			1,034
Less: current maturities		(21	)		(84	)
Long-term debt	$	954		$	950

	⁽¹⁾		During the quarter ended March 31, 2012, the company retired its $84 million 8-3/4 percent notes due 2012 at par value.

	⁽²⁾		The 4.625 percent and 4.0 percent convertible notes contain a put and call feature, which allows for earlier redemption beginning in 2016 and 2019, respectively.

Revolving Credit Facility

At March 31, 2012, the company had a revolving credit facility of $441 million which was slated to mature in January 2014. The availability under this facility was dependent upon various factors, including principally performance against certain financial covenants. At March 31, 2012 and September 30, 2011, there were no borrowings outstanding under the revolving facility. The revolving credit facility included a $100 million limit on the issuance of letters of credit. No letters of credit were outstanding at March 31, 2012 and September 30, 2011 under the revolving credit facility.

Availability under the revolving credit facility was subject to a collateral test, pursuant to which borrowings on the revolving credit facility could not exceed 1.0x the collateral test value. The collateral test was performed on a quarterly basis and under the most recent collateral test, the full amount of the revolving credit facility was available for borrowing at March 31, 2012. Availability under the revolving credit facility was also subject to certain financial covenants based on (i) the ratio of the company’s priority debt (consisting principally of amounts outstanding under the revolving credit facility, U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA and (ii) the amount of annual capital expenditures. The company was required to maintain a total priority debt-to-EBITDA ratio, as defined in the agreement, of (i) 2.25 to 1 as of the last day of each fiscal quarter commencing with the fiscal quarter ended September 30, 2011 through and including the fiscal quarter ended June 30, 2012; and (ii) 2.00 to 1 as of the last day of each fiscal quarter thereafter through maturity. At March 31, 2012, the company was in compliance with all covenants under its credit agreement with a ratio of approximately 0.26x for the priority debt-to-EBITDA covenant.

Borrowings under the revolving credit facility were collateralized by approximately $653 million of the company’s assets, primarily consisting of eligible domestic U.S. accounts receivable, inventory, plant, property and equipment, intellectual property and the company’s investment in all or a portion of certain of its wholly-owned subsidiaries.

Borrowings under the revolving credit facility were subject to interest based on quoted LIBOR rates plus a margin, and a commitment fee on undrawn amounts, both of which were based upon the company’s current credit rating for the senior secured facility. At March 31, 2012, the margin over LIBOR rate was 425 basis points and the commitment fee was 50 basis points.

Certain of the company’s subsidiaries, as defined in the credit agreement, irrevocably and unconditionally guaranteed amounts outstanding under the revolving credit facility. Similar subsidiary guarantees were provided for the benefit of the holders of the publicly-held notes outstanding under the company’s indentures (see Note 23).

Amended Bank Credit Facility (Subsequent Event)

On April 23, 2012, the company amended and restated the above described revolving credit facility. Pursuant to the revolving credit facility agreement as amended, the company has a $429 million revolving credit facility, $14 million of which matures in January 2014 for a bank not electing to extend its commitments under the revolving credit facility existing at March 31, 2012 and the remaining $415 million of which matures in April 2017. The April 2017 maturity date is also subject to the following: if on June 1, 2015, the outstanding principal amount of the company’s $250 million bonds due 2015 is greater than $100 million, the maturity date becomes June 10, 2015 and if on November 1, 2015, the outstanding principal amount of the company’s $300 million 4.625 percent convertibles notes due 2026 is greater than $100 million and the conversion price of $20.98 is greater than the then current Meritor common stock price, the maturity date becomes November 15, 2015. The availability under this facility is dependent upon various factors, including principally performance against certain financial covenants. The amended and extended revolving credit facility includes $100 million of availability for the issuance of letters of credit.

Availability under the amended and extended revolving credit facility is subject to a collateral test, pursuant to which borrowings on the revolving credit facility cannot exceed 1.0x the collateral test value. The collateral test is performed on a quarterly basis. The availability under the revolving credit facility is also subject to certain financial covenants based on (i) the ratio of the company’s priority debt (consisting principally of amounts outstanding under the revolving credit facility, U.S. accounts receivable securitization and factoring programs, and third-party non-working capital foreign debt) to EBITDA and (ii) the amount of annual capital expenditures. The company is required to maintain a total priority-debt-to-EBITDA ratio, as defined in the agreement, of (i) 2.50 to 1.00 as of the last day of the fiscal quarter commencing with the fiscal quarter ending on or about March 31, 2012 through and including the fiscal quarter ending on or about September 30, 2012, (ii) 2.25 to 1.00 as of the last day of each fiscal quarter commencing with the fiscal quarter ending on or about December 31, 2012 through and including the fiscal quarter ending on or about September 30, 2013, and (iii) 2.00 to 1.00 as of the last day of each fiscal quarter thereafter. Borrowings under the amended and extended revolving credit facility are subject to the same interest rate and commitment fee terms as applicable to the existing revolving credit facility discussed above.

As part of the amendment and restatement of the above described revolving credit facility, on April 23, 2012, the company entered into a $100 million term loan agreement with a maturity date of April 23, 2017. The term loan will amortize over a period of 5 years from the effective date as follows: $5 million principal to be repaid during year one, $10 million principal to be repaid in each of the years two, three and four; and the remaining principal balance to be paid in year five. Payments will be made on a quarterly basis for the duration of the term loan. As of the effective date of the term loan, the margin over LIBOR rate was 425 basis points. The company has the ability to prepay the term loan at any time without penalty or premium.

Capital Leases

On March 20, 2012, the company entered into an arrangement to finance equipment acquisitions for various U.S. locations. Under this arrangement, the company can request financing from GE Capital Commercial, Inc. (GE Capital) for progress payments for equipment under construction, not to exceed $10 million at any point in time. The financing rate is equal to the 30-day LIBOR plus 575 basis points per annum. Under this arrangement, the company can also enter into lease arrangements with GE Capital for completed equipment. The lease term is 60 months and the lease interest rate is equal to the 5-year Swap Rate published by the Federal Reserve Board plus 564 basis points. As of March 31, 2012, the company had $4 million outstanding under these arrangements.

Letter of Credit Facilities

The company entered into a five-year credit agreement dated as of November 18, 2010 with Citicorp USA, Inc., as administrative agent and issuing bank, the other lenders party thereto and the Bank of New York Mellon, as paying agent. Under the terms of this credit agreement, as amended, the company has the right to obtain the issuance, renewal, extension and increase of letters of credit up to an aggregate availability of $30 million. This facility contains covenants and events of default generally similar to those existing in our public debt indentures. At March 31, 2012 and September 30, 2011, $29 million and $30 million, respectively, of letters of credit were outstanding under this facility. In addition, the company had another $6 million and $2 million of letters of credit outstanding through other letters of credit facilities at March 31, 2012 and September 30, 2011, respectively.