Debt

3 Months Ended

Dec. 31, 2011

Debt [Abstract]

DEBT

6. DEBT

Our outstanding debt balances consist of the following:

	December 31, 2011			September 30, 2011
Senior Notes, 9%, due 2015	$	105,000		$	105,000
Capital Leases, due through 2014		82			103
Total Debt		105,082			105,103
Less Current Portion		(54	)		(69	)
Total Long-term Debt	$	105,028		$	105,034

Senior Notes. In February 2007, we issued and sold $110,000 aggregate principal amount of 9.0% Senior Notes due February 1, 2015 (collectively, with the exchange notes issued in August 2007 as referenced below, the “Senior Notes”). Proceeds from the issuance of the Senior Notes were used to repay our former credit facilities. The Senior Notes accrue interest at an annual rate of 9.0%, payable semi-annually in February and August. The Senior Notes are guaranteed on a senior unsecured basis by all of our existing and future material U.S. subsidiaries. The Senior Notes are:

• ranked equally in right of payment with all of our existing and future senior indebtedness;

• ranked senior in right of payment to all of our existing and future senior subordinated and subordinated indebtedness;

• effectively junior to our existing and future secured debt to the extent of the value of the assets securing such debt; and

• structurally subordinated to all of the existing and future liabilities (including trade payables) of each of our subsidiaries that do not guarantee the Senior Notes.

The Senior Notes may be redeemed by the Company, in whole or in part, under the following circumstances:

• at any time after February 1, 2011 at redemption prices beginning at 104.5% of the principal amount to be redeemed and reducing to 100% by February 1, 2013; and

• under certain changes of control, we must offer to purchase the Senior Notes at 101% of their aggregate principal amount, plus accrued interest.

The Senior Notes were issued pursuant to an indenture which contains certain customary events of default, including cross default provisions if we default under our existing and future debt agreements having, individually or in the aggregate, a principal or similar amount outstanding of at least $10,000, and certain other covenants limiting, subject to exceptions, carve-outs and qualifications, our ability to:

• incur additional debt;

• pay dividends or make other restricted payments;

• create liens on assets to secure debt;

• incur dividend or other payment restrictions with regard to restricted subsidiaries;

• transfer or sell assets;

• enter into transactions with affiliates;

• enter into sale and leaseback transactions;

• create an unrestricted subsidiary;

• enter into certain business activities; or

• effect a consolidation, merger or sale of all or substantially all of our assets.

In connection with the closing of the sale of the Senior Notes, we entered into a registration rights agreement which required us to file a registration statement to offer to exchange the Senior Notes for notes that have substantially identical terms as the Senior Notes and are registered under the Securities Act of 1933, as amended. In July 2007, we filed a registration statement with the SEC with respect to an offer to exchange the Senior Notes as required by the registration rights agreement, which registration statement was declared effective by the SEC. In August 2007, we completed the exchange of 100% of the Senior Notes for substantially identical notes which are registered under the Securities Act of 1933, as amended.

ABL Credit Facility. On January 31, 2011, American Pacific Corporation, as borrower, entered into an asset based lending credit agreement (the “ABL Credit Facility”) with Wells Fargo Bank, National Association, as agent and as lender, and certain domestic subsidiaries of the Company, as guarantors, which provides a secured revolving credit facility in an aggregate principal amount of up to $20,000 at any time outstanding with an initial maturity to be the earlier of (i) January 31, 2015 and (ii) 90 days prior to the maturity date of the Senior Notes, which is February 1, 2015. The ABL Credit Facility also provides for the issuance of new letters of credit with a letter of credit sublimit of $5,000.

The maximum borrowing availability under the ABL Credit Facility is based upon a percentage of our eligible account receivables and eligible inventories. We may prepay and terminate the ABL Credit Facility at any time, without premium or penalty. The ABL Credit Facility contains certain mandatory prepayment provisions. The annual interest rates applicable to loans under the ABL Credit Facility will be, at our option, either at a Base Rate or LIBOR Rate (each as defined in the ABL Credit Facility) plus, in each case, an applicable margin of 2.50 percentage points. In addition, we will pay commitment fees, other fees related to the issuance and maintenance of the letters of credit, and certain agency fees.

The ABL Credit Facility is guaranteed by our current and future domestic subsidiaries and is secured by substantially all of our assets and the assets of our current and future domestic subsidiaries, subject to certain exceptions as set forth in the ABL Credit Facility. The ABL Credit Facility contains certain negative covenants, subject to customary exceptions and exclusions, restricting and limiting our ability to, among other things:

• incur debt, incur contingent obligations and issue certain types of preferred stock, or prepay certain debt;

• create liens;

• pay dividends, distributions or make other specified restricted payments;

• make certain investments and acquisitions;

• enter into certain transactions with affiliates;

• enter into sale and leaseback transactions; and

• merge or consolidate with any other entity or sell, assign, transfer, lease, convey or otherwise dispose of assets.

The ABL Credit Facility also contains financial covenants which are only triggered by utilization of the ABL Credit Facility and borrowing availability not exceeding a designated threshold amount. If the financial covenants are triggered, then we would be subject to the following financial covenants:

• Fixed Charge Coverage Ratio. We would be required to maintain a minimum fixed charge coverage ratio on a rolling trailing twelve-month basis of at least 1.10:1.00.

• Maximum Capital Expenditures. The ABL Credit Facility limits our capital expenditures in any fiscal year to amounts set forth in the ABL Credit Facility.

The ABL Credit Facility also contains usual and customary events of default (in some cases, subject to certain threshold amounts and grace periods), including cross-default provisions that include the Senior Notes. If an event of default occurs and is continuing, we may be required to repay the obligations under the ABL Credit Facility prior to the ABL Credit Facility’s stated maturity and the related commitments may be terminated.

On December 31, 2011, under the ABL Credit Facility, we had no outstanding borrowings, had availability of $20,000, and were not subject to compliance with the financial covenants.

Debt Issue Costs. In connection with the issuance of the Senior Notes and ABL Credit Facility, we incurred debt issuance costs of approximately $4,814 and $878, respectively, which were capitalized and classified as other assets on our consolidated balance sheets. These costs are being amortized as additional interest expense over the respective terms of the instruments.

Letters of Credit. As of December 31, 2011, we had $741 in outstanding standby letters of credit which mature through October 2015. These letters of credit principally secure performance of certain water treatment equipment sold by us. The letters of credit are collateralized by cash on deposit with the issuing bank in the amount of 105% of the outstanding letters of credit. Collateral deposits are classified as other assets on our consolidated balance sheets.