4. DEBT

Our outstanding debt balances consist of the following as of September 30:



	2013			2012

Term Loan, variable-rate interest, due through 2017	$	55,500		$	-
Senior Notes, 9%, due 2015		-			65,000
Capital Leases, due through 2014		2			20

Total Debt		55,502			65,020
Less Current Portion		(6,002	)		(16	)

Total Long-term Debt	$	49,500		$	65,004

Senior Notes. In February 2007, we issued and sold $110,000 aggregate principal amount of 9.0% Senior Notes due February 1, 2015 (the “Senior Notes”). The Senior Notes accrued interest at an annual rate of 9.0%, payable semi-annually in February and August. The Senior Notes were guaranteed on a senior unsecured basis by all of our existing and future material U.S. subsidiaries.

On August 9, 2012, we called $40,000 of the outstanding principal amount of the Senior Notes. On September 10, 2012, we completed the redemption, using net cash proceeds from the sale of AMPAC-ISP and available cash balances. The redemption price for the Notes was 102.25% of the principal amount of the Notes being redeemed, plus accrued and unpaid interest to the redemption date. The transaction resulted in a net loss on debt retirement of $1,397 which includes the call premium of $900, unamortized debt issuances costs of $482 and other expenses of $15.

In connection with our entering into the Credit Facility (as defined below), on October 26, 2012, a notice of redemption was issued for all remaining outstanding Senior Notes specifying a redemption date of November 25, 2012. The Redemption Price for the Notes was 102.250% of the outstanding principal amount of $65,000, plus accrued and unpaid interest to, but not including, the redemption date. On October 26, 2012, we irrevocably deposited funds with the trustee in an amount equal to the Redemption Price for the Senior Notes and the related indenture was discharged. The transaction resulted in a net loss on debt retirement of $2,835 which includes the call premium of $1,463, the write-off of then unamortized debt issuances costs of $1,252 and other expenses of $120.

ABL Credit Facility. On January 31, 2011, American Pacific Corporation, as borrower, with certain domestic subsidiaries of the Company as guarantors, entered into an asset-based lending credit agreement (the “ABL Credit Facility”) with Wells Fargo Bank, National Association, as agent and as lender, which provided a secured revolving credit facility in an aggregate principal amount of up to $20,000 at any time outstanding with an initial maturity of 90 days prior to the maturity date of the Senior Notes, which was February 1, 2015. The maximum borrowing availability under the ABL Credit Facility was based upon a percentage of our eligible account receivables and eligible inventories. On October 26, 2012, we terminated the ABL Credit Facility.

Credit Facility. On October 26, 2012, we entered into an $85,000 senior secured credit agreement (the “Credit Facility”) by and among American Pacific Corporation, the lenders party thereto (the “Lenders”) and KeyBank National Association, as the swing line lender, issuer of letters of credit under the Credit Facility and as the Administrative Agent of the Lenders. Under the Credit Facility, we (i) obtained a term loan in the aggregate principal amount of $60,000 with an initial maturity in five years (the “Term Loan”), and (ii) may obtain revolving loans of up to $25,000 in aggregate principal amount, of which up to $5,000 may be outstanding in connection with the issuance of letters of credit (the “Revolving Facility”). We may prepay and terminate the Credit Facility at any time, without premium or penalty. The Credit Facility contains certain mandatory prepayment provisions which are based upon certain asset sales, equity issuances, incurrence of certain indebtedness and events of loss.

Available borrowings under the Revolving Facility are computed as the $25,000 committed line less any outstanding revolving loans and outstanding letters of credits. As of September 30, 2013, we had no borrowings outstanding under the Revolving Facility, outstanding letters of credit of $4,466 and availability for revolving loans of $20,534.

For any loans under the Credit Facility, we elect between two options to determine the annual interest rates applicable to such loans: Base Rate Loans and Eurodollar Loans. These elections can be renewed or changed from time to time during the term of the Credit Facility. The interest rate for an election period is determined as the Base Rate or the Adjusted Eurodollar Rate (each as defined in the Credit Facility), and in each case, plus an applicable margin, which shall range from 0.75% to 1.50% for Base Rate Loans or from 1.75% to 2.50% for Eurodollar Loans, subject to adjustment based on the leverage ratio. Interest payments are due at least quarterly and may be more frequent under certain Eurodollar Loan elections. The Term Loan includes quarterly principal amortization payments which commenced on December 31, 2012. Scheduled Amortization of the Term Loan is $4,500, $6,000, $6,000, $6,000 and $7,500 for each of the five years in the period ending September 30, 2017, respectively. The remaining balance of the Term Loan of $30,000 is due upon maturity.

The 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 Credit Facility.

The Credit Facility contains customary affirmative, negative and financial covenants which, among other things, restrict our ability to:

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pay dividends, repurchase our stock, or make other restricted payments;

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make certain investments or acquisitions;

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incur additional indebtedness;

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create or permit to exist certain liens;

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enter into certain transactions with affiliates;

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consummate a merger, consolidation or sale of assets;

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change our business; and

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wind up, liquidate, or dissolve our affairs.

In each case, the covenants set forth above are subject to customary and negotiated exceptions and exclusions.

The Credit Facility includes two financial covenants that are measured quarterly.

Leverage Ratio. The Leverage Ratio must be less than or equal to 3.00 to 1.00. The Credit Facility defines the Leverage Ratio as the ratio of Consolidated Total Debt as of the last day of a quarter (“Test Date”) to Consolidated EBITDA for the four consecutive quarters preceding the Test Date, each as defined in the Credit Facility.

Debt Service Coverage Ratio. The Debt Service Coverage Ratio must be at least 2.00 to 1.00, with increases to 2.25 to 1.00 for the period commencing September 30, 2014 to September 29, 2015, and to 2.50 to 1.00 for the period commencing September 30, 2015 and thereafter. The Credit Facility defines the Debt Service Coverage Ratio as the ratio of Consolidated EBITDA minus Consolidated Capital Expenditures to Scheduled Repayments plus Consolidated Adjusted Interest Expense, each as defined in the Credit Facility.

With respect to these covenant compliance calculations, Consolidated EBITDA, as defined in the Credit Facility (hereinafter, referred to as “Credit Facility EBITDA”), differs from typical EBITDA calculations and our calculation of Adjusted EBITDA, which is used in certain of our public releases and in connection with our incentive compensation plan. The most significant difference in the Credit Facility EBITDA calculation is the inclusion of cash payments for environmental remediation as part of the calculation. The following statements summarize the elements of those definitions that are material to our computations. Consolidated Total Debt generally includes principal amounts outstanding under our Credit Facility, capital leases, drawn amounts for outstanding letters of credit and other indebtedness for borrowed money. Credit Facility EBITDA is generally computed as consolidated net income (loss) plus income tax expense (benefit), interest expense, depreciation and amortization, stock-based compensation expense, and certain non-cash charges and less cash payments for environmental remediation, extraordinary gains and certain other non-cash gains. In accordance with the definitions contained in the Credit Facility, as of September 30, 2013, our Leverage Ratio was 1.04 to 1.00 and our Debt Service Coverage Ratio was 6.21 to 1.00, each of which are in compliance with the applicable financial covenant.

The Credit Facility also contains usual and customary events of default (subject to certain threshold amounts and grace periods). If an event of default occurs and is continuing, the Company may be required to repay the obligations under the Credit Facility prior to the Credit Facility’s stated maturity and the related commitments may be terminated.

Principal Maturities. Principal maturities for our outstanding debt as of September 30, 2013 are as follows:


Years ending September 30:
2014	$	6,002
2015		6,000
2016		6,000
2017		7,500
2018		30,000

Total	$	55,502

Debt Issue Costs. In connection with the issuance of the Credit Facility, we incurred debt issuance costs of approximately $1,386, which are capitalized and classified as other assets on our consolidated balance sheets. These costs are being amortized, using the effective interest rate method, as additional interest expense over the term of the Credit Facility.

Letters of Credit. We issue letters of credit principally to secure performance related to insurance, utilities and certain product contracts. As of September 30, 2013, we had $4,466 in outstanding letters of credit, maturing through April 2017, that were issued under our Revolving Facility. In addition, as of September 30, 2013, we had $315 in outstanding standby letters of credit, maturing through April 2016, that were not issued under our Revolving Facility. Letters of credit that are not issued under our Revolving Facility 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.