Note 12 — Notes Payable and Long-Term Debt

Notes payable and long-term debt consisted of the following:


	December 29, 2012			December 31, 2011
	(In thousands)
Unsecured debt:
8.75% debentures due 2013	$	155,000		$	155,000
Secured debt:
13.875% notes due 2014		174,904			174,904
8% notes due 2016		315,000			315,000
Revolving credit facility		119,200			69,300
Term loan facilities		867,702			895,500
Contracts and notes, at a weighted average interest rate of 3.3% in 2012 (3.8% in 2011) through 2018		4,052			7,294
Capital lease obligations, at a weighted average interest rate of 2.7% in 2012 (3.0% in 2011)		55,015			57,000
Notes payable, at a weighted average interest rate of 1.3% in 2012 (3.1% in 2011)		19,762			27,969
Unamortized debt discounts		(16,477	)		(22,130	)

		1,694,158			1,679,837
Current maturities, net of unamortized debt discounts		(181,512	)		(38,725	)

	$	1,512,646		$	1,641,112

During 2012, Dole reclassified the interest expense and the related costs associated with Dole’s debentures, secured notes, revolving credit facility and its term loan facilities for all periods presented into discontinued operations. Concurrent with the consummation of the sale transaction, the unsecured debt and secured debt listed above will be repaid, defeased or discharged in full. Refer to Note 4 — Discontinued Operations for additional information.

Notes Payable

Dole borrows funds primarily on a short-term basis to finance current operations. The terms of these borrowings range from one month to three months. Dole’s notes payable at December 29, 2012 consist primarily of foreign borrowings in Latin America.

2011 Refinancing

Dole’s senior secured term loan and the asset-based lending senior secured revolving credit facility (“ABL revolver”) were amended and restated on July 8, 2011 (“2011 Refinancing”). The amendments reduced borrowing rates on the ABL revolver, with an opportunity to also reduce future borrowing rates on the term loans and eliminated the financial maintenance covenants of total leverage ratio and minimum interest coverage ratio (such covenants had been in the previous term loan facilities, but not the revolving credit facility). The amended credit facilities included $872.1 million of term debt due 2018 and provided a $350 million revolving credit facility due 2016.

Notes and Debentures

In July 1993, Dole issued and sold debentures due 2013 (“2013 Debentures”). The 2013 Debentures are not redeemable prior to maturity and were issued at 99.37% of par. The 2013 Debentures will be repaid, defeased or discharged in full concurrent with the consummation of the sale transaction.

On March 18, 2009, Dole completed the sale and issuance of $350 million aggregate principal amount of 13.875% Notes due 2014 (“2014 Notes”) at a discount of $25 million. The 2014 Notes will be repaid, defeased or discharged in full concurrent with the consummation of the sale transaction. The 2014 Notes were sold to qualified institutional buyers pursuant to Rule 144A under the Securities Act and to persons outside the United States in compliance with Regulation S under the Securities Act. The sale was exempt from the registration requirements of the Securities Act. Interest on the 2014 Notes is paid semi-annually in arrears on March 15 and September 15 of each year. The 2014 Notes have the benefit of a lien on certain U.S. assets of Dole that is junior to the liens of Dole’s senior secured credit facilities (revolving credit and term loan facilities) and pari passu with the liens of the 2016 Notes, and are senior obligations of Dole ranking equally with Dole’s existing senior debt. On November 30, 2009, Dole redeemed $122.5 million of the 2014 Notes with proceeds from Dole’s IPO.

During the third quarter of 2011, Dole repurchased and retired $52.5 million of the 2014 Notes. As a result of the repurchase, Dole recorded a charge of $13.5 million to discontinued operations in the consolidated statement of operations. The charge related to premiums paid in connection with the early debt retirement as well as the write-off of deferred debt issuance costs and debt discounts.

On September 25, 2009, Dole completed the sale and issuance of $315 million aggregate principal amount of 8% Senior Secured Notes due 2016 (“2016 Notes”) at a discount of $6.2 million. The 2016 Notes will be repaid, defeased or discharged in full concurrent with the consummation of the sale transaction. The 2016 Notes were sold to qualified institutional investors pursuant to Rule 144A under the Securities Act of 1933 (“Securities Act”) and to persons outside the United States in compliance with Regulation S under the Securities Act. The sale was exempt from the registration requirements of the Securities Act. Interest on the 2016 Notes is paid semi-annually in arrears on April 1 and October 1 of each year. The 2016 Notes will mature on October 1, 2016. The 2016 Notes have the benefit of a lien on certain U.S. assets of Dole that is junior to the liens of Dole’s senior secured credit facilities (revolving credit and term loan facilities) and pari passu with the liens of the 2014 Notes, and are senior obligations ranking equally with Dole’s existing senior debt.

Interest on the notes and debentures is paid semi-annually. None of Dole’s notes or debentures are subject to any sinking fund requirements. The notes and debentures are guaranteed by Dole’s 100% owned domestic subsidiaries. Refer to Note 24 — Guarantor Financial Information.

Term Loans and Revolving Credit Facility

As of December 29, 2012, the term loan facilities, which will be repaid in full concurrent with the consummation of the sale transaction, consisted of $311.1 million of Term Loan B and $556.6 million of Term Loan C. The term loan facilities bear interest, at Dole’s option, at a rate per annum equal to either (i) the London Interbank Offer Rate (“LIBOR”) plus 3.75%, with a LIBOR floor of 1.25%; or (ii) a base rate plus 2.75%. Interest on the term loan facilities is payable quarterly in arrears or at maturity of LIBOR contracts. The weighted average variable interest rate at December 29, 2012 for Term Loan B and Term Loan C was 5.03%. The term loan facilities require quarterly principal payments, plus a balloon payment due in 2018.

As of December 29, 2012, there was $119.2 million outstanding under the ABL revolver. Amounts outstanding under the ABL revolver, which will be repaid in full concurrent with the consummation of the sale transaction, bear interest, at Dole’s option, at a rate per annum equal to either (i) LIBOR plus 1.75% to 2.25%, or (ii) a base rate plus 0.75% to 1.25%, in each case, based upon Dole’s historical borrowing availability under this facility. The weighted average variable interest rate at December 29, 2012 was 3.22%. As of December 29, 2012, the borrowing base for the ABL revolver was $331.3 million. After taking into account approximately $95.0 million of outstanding letters of credit issued under the ABL revolver and the outstanding ABL balance, Dole had approximately $117.1 million available for borrowings as of December 29, 2012. The ABL revolver matures in 2016.

Capital Lease Obligations

At December 29, 2012 and December 31, 2011, included in capital lease obligations were $54 million and $54.3 million, respectively, of vessel financing related to two vessel leases denominated in British pound sterling. The capital lease obligation decreased primarily due to lease payments. The interest rates on these leases are based on LIBOR plus a spread. The remaining $1.0 million of capital lease obligations relate primarily to machinery and equipment. Interest rates under these leases are fixed. The capital lease obligations are collateralized by the underlying leased assets. Total payments, including principal and interest, through the remaining life of the lease total approximately $65.1 million. These leases expire in 2026.

Covenants

Provisions under the senior secured credit facilities and the indentures governing Dole’s senior secured notes and debentures, all of which will be repaid, defeased or discharged in full concurrent with the consummation of the sale transaction, require Dole to comply with certain covenants. These covenants include limitations on, among other things, indebtedness, investments, liens, loans to subsidiaries, employees and third parties, the issuance of guarantees and the payment of dividends. The ABL revolver also contains a “springing covenant,” which would not be effective unless the availability under the ABL revolver were to fall below the greater of (i) $35 million and (ii) 12.5% of the lesser of the Total Commitment (as defined) and the borrowing base. To date, the springing covenant has never been effective and Dole does not currently anticipate that the springing covenant will become effective. At December 29, 2012, Dole was in compliance with all applicable covenants.

A breach of a covenant or other provision in any debt instrument governing Dole’s indebtedness could result in a default under that instrument and, due to customary cross-default and cross-acceleration provisions, could result in a default under Dole’s other debt instruments. Upon the occurrence of an event of default under the senior secured credit facilities or other debt instrument, the lenders or holders of such debt could elect to declare all amounts outstanding to be immediately due and payable and terminate all commitments to extend further credit. If Dole were unable to repay those amounts, the lenders could proceed against the collateral granted to them, if any, to secure the indebtedness. If the lenders under Dole’s indebtedness were to accelerate the payment of the indebtedness, Dole cannot give assurance that its assets would be sufficiently liquid to repay in full its outstanding indebtedness on an accelerated basis.

Debt Issuance Costs

In connection with the 2011 Refinancing, Dole incurred debt issuance costs of $13 million. During 2010, Dole incurred debt issuance costs of $17 million related to the amendments of the senior secured credit facilities. During 2009, Dole incurred debt issuance costs of $25.5 million in connection with the issuance of the 2016 Notes, as well as the issuance of the 2014 Notes and the amendment of Dole’s senior secured credit facilities. Debt issuance costs are capitalized and amortized into interest expense over the term of the underlying debt. During the years ended December 29, 2012, December 31, 2011 and January 1, 2011, Dole amortized deferred debt issuance costs of $5.4 million, $5.8 million and $6.6 million, respectively, which have been reflected in discontinued operations.

As a result of the 2011 Refinancing, Dole recorded a charge of $12.7 million which has been reflected in discontinued operations. The charge relates to fees incurred in connection with the refinancing as well as the write-off of debt issuance costs and debt discounts.

During 2010, Dole wrote off $4.6 million of deferred debt issuance costs resulting from the amendment of the senior secured credit facilities, as well as the refinancing of the term loan facilities in connection with the amendments. The refinancing of the term loans and a portion of the ABL revolver, as a result of the amendments, was accounted for as extinguishment of debt. The charge was reflected in discontinued operations, net for the year ended January 1, 2011.

Debt discounts on term loan facilities in connection with the 2011 Refinancing were $6.8 million. Debt discounts on term loan facilities in connection with 2010 amendments of the senior secured credit facilities totaled $8.5 million. Debt discounts are amortized over the term of the underlying debt and have been reflected in discontinued operations. During the years ended December 29, 2012, December 31, 2011 and January 1, 2011, Dole amortized debt discounts of $5.4 million, $5.0 million and $4.7 million, respectively.

Fair Value of Debt

Dole estimates the fair value of its unsecured notes and debentures based on current quoted market prices. The term loans are traded between institutional investors on the secondary loan market, and the fair values of the term loans are based on the last available trading price.

The carrying values and estimated fair values of Dole’s debt based on level 2 inputs in the fair value hierarchy are summarized below:


	December 29, 2012				December 31, 2011
	Carrying Values		Estimated Fair Values		Carrying Values		Estimated Fair Values
	(In thousands)
Secured and unsecured notes and debentures	$	637,637	$	681,731	$	633,970	$	694,314
Term loans		858,492		867,702		884,304		888,784

Carrying values are net of debt discounts.

Maturities of Notes Payable and Long-Term Debt

Stated maturities with respect to notes payable and long-term debt as of December 29, 2012 were as follows (in thousands), although all of the senior notes, debentures, term loan facilities and the ABL will be repaid, defeased or discharged in full concurrent with the consummation of the sale transaction,:


Fiscal Year	Amount
2013	$	181,512
2014		185,799
2015		9,604
2016		444,086
2017		11,012
Thereafter		862,145

Total	$	1,694,158

Uncommitted Lines of Credit

In addition to amounts available under the revolving credit facility, Dole’s continuing operation subsidiaries have uncommitted lines of credit of approximately $26 million at various local banks, of which $6.3 million was available at December 29, 2012. Dole’s discontinued operation subsidiaries have uncommitted lines of credit of approximately $141.2 million at various local banks, of which $94.4 million was available at December 29, 2012. These lines of credit are used primarily for short-term borrowings, foreign currency exchange settlement and the issuance of letters of credit or bank guarantees. Several of Dole’s uncommitted lines of credit expire in 2013, while others do not have a commitment expiration date. These arrangements may be cancelled at any time by Dole or the banks. Dole’s ability to utilize these lines of credit may be impacted by the terms of its senior secured credit facilities and bond indentures.