12. DEBT

As of January 31, 2011 and 2010, debt is comprised of the following:


	January 31,
	2011		2010
	(In thousands)
Convertible debt obligations	$	2,195	$	2,195
Term loan		583,234		605,912
Line of credit		6,000		—
Revolving credit facility		—		15,000

Total debt		591,429		623,107
Less: current portion		8,195		22,678

Total long-term debt	$	583,234	$	600,429

Convertible Debt Obligations

In May 2003, CTI issued $420.0 million aggregate principal amount of Convertible Debt Obligations (the "Existing Convertible Debt Obligations"). On January 26, 2005, CTI completed an offer to the holders of the outstanding Existing Convertible Debt Obligations to exchange the Existing Convertible Debt Obligations for New Convertible Debt Obligations (the "New Convertible Debt Obligations"). Of the $420.0 million aggregate principal amount of Existing Convertible Debt Obligations outstanding prior to the exchange offer, approximately $417.7 million aggregate principal amount representing approximately 99.5% of the original issue of Existing Convertible Debt Obligations were validly tendered in exchange for an equal principal amount of New Convertible Debt Obligations.

The Convertible Debt Obligations mature on May 15, 2023 and do not bear interest. Under the provisions of the FASB's guidance relating to debt with conversion and other options, that may be settled in cash upon conversion including partial cash payments, the Company recorded debt discount of $73.1 million as of the exchange date (January 26, 2005) of the New Convertible Debt Obligations, and amortized that amount to "Interest expense" utilizing the effective interest method over a 3.3 year period (expected life of the liability) to May 15, 2008, the first designated date on which the holders had the right to require CTI to repurchase their New Convertible Debt Obligations. The debt discount was fully amortized as interest expense through May 15, 2008, at an effective rate of 5.83%.

The Convertible Debt Obligations are not secured by any assets of the Company and are not guaranteed by any of CTI's subsidiaries.

Under the terms of the indenture governing the New Convertible Debt Obligations, CTI had an obligation to offer to purchase for cash the New Convertible Debt Obligations on May 15, 2009. To meet its obligations under the indenture, CTI commenced a tender offer on April 17, 2009. Upon the completion of the tender offer on May 15, 2009, CTI purchased, using available cash, $417.3 million aggregate principal amount of New Convertible Debt Obligations. Following the repurchase of the New Convertible Debt Obligations, as of January 31, 2011 and 2010, CTI had $2.2 million aggregate principal amount of outstanding Convertible Debt Obligations, which, as of such dates, included $0.1 million of aggregate principal amount of outstanding New Convertible Debt Obligations.

Each $1,000 principal amount of the New Convertible Debt Obligations and Existing Convertible Debt Obligations is convertible, at the option of the holder upon the circumstances described below, into shares of CTI's common stock at a conversion price of $17.9744 per share (equal to a conversion rate of 55.6347 shares per $1,000 principal amount of Existing Convertible Debt Obligations), subject to adjustment for certain events.

Conversion of the New Convertible Debt Obligations is made based on a net share settlement feature, which provides that, upon conversion, CTI would pay to the holder cash equal to the lesser of the conversion value and the principal amount of the New Convertible Debt Obligations being converted and would issue to the holder the remainder of the conversion value in excess of the principal amount, if any, in shares of CTI's common stock.

The Convertible Debt Obligations are convertible: (i) during any quarter, if the closing price per share for a period of at least twenty days in the thirty consecutive trading-day period ending on the last trading day of the preceding fiscal quarter is more than 120% of the conversion price per share in effect on that thirtieth day; (ii) on or before May 15, 2018, if during the five business-day period following any ten consecutive trading-day period in which the daily average trading price for the Convertible Debt Obligations for that ten trading-day period was less than 105% of the average conversion value for the Convertible Debt Obligations during that period; (iii) during any period, if following the date on which the credit rating assigned to the Convertible Debt Obligations by S&P is lower than "B-" or upon the withdrawal or suspension of the Convertible Debt Obligations rating at CTI's request; (iv) if CTI calls the Convertible Debt Obligations for redemption; or (v) upon other specified corporate transactions. On August 19, 2010, S&P discontinued rating the Convertible Debt Obligations at which time they became convertible and were reclassified to current liabilities as of such date.

In addition, CTI had the right to redeem the New Convertible Debt Obligations and Existing Convertible Debt Obligations for cash at any time on or after May 15, 2009 and May 15, 2008, respectively, at their principal amount. On each of May 15, 2013 and May 15, 2018 and following a termination of trading of CTI's common stock on a national securities exchange or on an established automated over-the-counter trading market in the United States, or in certain instances, upon a change of control, each holder of Convertible Debt Obligations will have the right to have all of the principal amount of its Convertible Debt Obligations, or any portion of the principal amount thereof, repurchased by CTI for cash at a purchase price of 100% of the principal amount of such holder's Convertible Debt Obligations.

Verint Credit Facilities

On May 25, 2007, Verint entered into a credit agreement with a group of banks to fund a portion of the acquisition of Witness. On April 29, 2011, Verint (i) entered into a credit agreement (the "New Credit Agreement") with a group of lenders and Credit Suisse AG, as administrative agent and collateral agent for the lenders (in such capacities, the "Agent"), and (ii) terminated the credit agreement, dated May 25, 2007 (the "Prior Facility"). The discussion below relates to the Prior Facility which was in effect during the fiscal year ended January 31, 2011. For a discussion of the terms of the New Credit Agreement, see Note 28, Subsequent Events.

Prior Facility

The Prior Facility provided for a $650.0 million seven-year term loan facility and a $25.0 million six-year revolving line of credit that was scheduled to mature on May 25, 2014 and May 25, 2013, respectively. Verint's $25.0 million revolving line of credit was effectively reduced to $15.0 million during the fiscal quarter ended October 31, 2008, in connection with the bankruptcy of Lehman Brothers and the related subsequent termination of its revolving commitment under the Prior Facility in June 2009. As further discussed below, the borrowing capacity under the revolving line of credit was increased to $75.0 million in July 2010. During the quarter ended January 31, 2009, Verint borrowed the full $15.0 million then available under the revolving line of credit, which Verint repaid during the fiscal quarter ended January 31, 2011.

In July 2010, the Prior Facility was amended to, among other things, (a) change the method of calculation of the applicable interest rate margin to be based on Verint's periodic consolidated leverage ratio, (b) add a London Interbank Offered Rate ("LIBOR") floor of 1.50%, (c) change certain negative covenants, including providing covenant relief with respect to the permitted consolidated leverage ratio, and (d) increase the aggregate amount of incremental revolving commitment and term loan increases permitted under the Prior Facility from $50.0 million to $200.0 million. Also in July 2010, Verint amended the Prior Facility to increase the revolving line of credit from $15.0 million to $75.0 million. The commitment fee for unused capacity under the revolving line of credit was increased from 0.50% to 0.75% per annum.

In consideration for the July 2010 amendments, Verint paid $2.6 million to its lenders. These payments were included within deferred debt-related costs as of January 31, 2011 and for the fiscal year ended January 31, 2010 were subject to amortization over the remaining contractual term of the Prior Facility, as further discussed below. Legal fees and other out-of-pocket costs directly relating to these amendments, which were expensed as incurred, were not significant.

Substantial modifications of credit terms require assessment to determine whether the modifications should be accounted for and reported in the same manner as a formal extinguishment of the prior arrangement and replacement with a new arrangement, with the potential recognition of a gain or loss on the extinguishment. The July 2010 Prior Facility amendments were determined to be modifications of the prior arrangement, not requiring extinguishment accounting.

Following the July 2010 modifications, borrowings under Verint's term loan and revolving credit facilities bore interest at a rate of either, at Verint's election, (a) the highest of (i) the prime rate, (ii) the federal funds rate plus 0.50%, and (iii) one-month LIBOR (subject to a 1.50% floor) plus 1.00%, or (b) LIBOR (subject to a 1.50% floor), plus, in either case, an applicable interest rate margin. In the case of prime rate or federal funds rate ("Base Rate") borrowings, the interest rate adjusted in unison with the underlying index. In the case of LIBOR borrowings, the interest rate adjusted at the end of the relevant LIBOR period. Prior to the July 2010 modifications, the applicable interest rate margin under the Prior Facility was determined by reference to Verint's corporate ratings, and twice increased (in February 2008 and again in August 2008) due to Verint's failure to deliver certain audited financial statements and lack of corporate ratings, and subsequently decreased in June 2010 when Verint delivered the required audited financial statements and obtained corporate ratings. From July 2010, the applicable interest rate margin was determined by reference to Verint's consolidated leverage ratio, which is further discussed below, and could vary from 2.50% to 3.25% with respect to Base Rate borrowings, and 3.50% to 4.25% with respect to LIBOR borrowings.

As of January 31, 2011, the interest rate on the term loan was 5.25%.

Optional prepayments of the loans were permitted without premium or penalty (other than customary breakage costs associated with the prepayment of loans bearing interest based on LIBOR). The loans were also subject to mandatory prepayment requirements based upon certain asset sales, excess cash flow, and certain other events.

The term loan originally amortized in 27 consecutive quarterly installments of $1.6 million each, beginning August 1, 2007, followed by a final amortization payment of the remaining outstanding principal amount when the loan matured. In July 2007, Verint made an optional term loan prepayment of $40.0 million, $13.0 million of which was applied to the eight immediately following principal payments and $27.0 million of which was applied pro rata to the remaining principal payments. In May 2009, Verint made a $4.1 million mandatory excess cash flow prepayment on the term loan, related to the fiscal year ended January 31, 2009, which was applied to the three immediately following principal payments. In May 2010, Verint made a $22.1 million mandatory excess cash flow prepayment of the term loan, related to the fiscal year ended January 31, 2010, $12.4 million of which was scheduled to be applied to the eight immediately following principal payments and $9.7 million of which was scheduled to be applied pro rata to the remaining principal payments based on the terms of the Prior Facility. A mandatory excess cash flow prepayment was not required in respect of Verint's fiscal year ended January 31, 2011.

Verint paid debt issuance costs of $13.6 million associated with the May 2007 origination of the Prior Facility and incurred $4.3 million of additional costs for subsequent modifications of the Prior Facility, which were deferred and were classified within "Other assets." These deferred costs were subject to amortization over the original or remaining term of the Prior Facility, as applicable. Amortization of deferred costs associated with the term loan was recorded using the effective interest rate method, while amortization of deferred costs associated with the revolving credit facility was recorded on a straight-line basis.

During the fiscal years ended January 31, 2011, 2010, and 2009, Verint incurred $26.2 million, $22.6 million and $35.2 million of interest expense, respectively, on borrowings under the Prior Facility. Verint also recorded amortization of its deferred debt issuance costs of $2.8 million, $1.9 million and $1.7 million for the fiscal years ended January 31, 2011, 2010, and 2009, respectively, reported within interest expense. Included in the deferred debt-related cost amortization for the fiscal years ended January 31, 2011 and 2010 were $0.3 million and $0.1 million, respectively, of additional amortization associated with the principal prepayments in those fiscal years.

Verint's obligations under the Prior Facility were guaranteed by certain of Verint's domestic subsidiaries (including Witness) and were secured by substantially all of the assets of Verint Systems and these subsidiaries. The Prior Facility was not guaranteed by CTI and was not secured by any of its assets.

The Prior Facility contained customary affirmative and negative covenants for credit facilities of its type, including limitations on Verint and its subsidiaries with respect to indebtedness, liens, dividends and distributions, acquisitions and dispositions of assets, investments and loans, transactions with affiliates, and nature of business. Accordingly, the Prior Facility precluded Verint Systems from paying cash dividends and limited its ability to make asset distributions to its stockholders, including CTI.

The Prior Facility contained one financial covenant that required Verint not to exceed a certain consolidated leverage ratio, as of each fiscal quarter end, with respect to the then applicable trailing twelve months. The consolidated leverage ratio was defined as Verint's consolidated net total debt divided by consolidated earnings before interest, taxes, depreciation, and amortization ("EBITDA") as defined in the agreement. As amended in July 2010, the consolidated leverage ratio was not permitted to exceed 3.50:1 for periods through October 31, 2011, and was not permitted to exceed 3.00:1 for all quarterly periods thereafter. As of January 31, 2011, Verint was in compliance with such requirements.

The Prior Facility also included a requirement that Verint submit audited consolidated financial statements to the lenders within 90 days of the end of each fiscal year, beginning with the financial statements for the fiscal year ended January 31, 2010. Should Verint have failed to deliver such audited consolidated financial statements as required, the agreement provided a thirty day period to cure such default, or an event of default would occur.

In April 2010, Verint entered into an amendment to the Prior Facility to extend the due date for delivery of audited consolidated financial statements and related documentation for the fiscal year ended January 31, 2010 from May 1, 2010 to June 1, 2010. In consideration for this amendment, Verint paid $0.9 million to its lenders, which was included within deferred debt-related costs and was subject to amortization over the remaining term of the Prior Facility, as discussed above. Legal fees and other out-of-pocket costs directly relating to the amendment, which were expensed as incurred, were not significant.

The Prior Facility contained customary events of default with corresponding grace periods. If an event of default occurred and was continuing, the lenders could terminate and/or suspend their obligations to make loans and issue letters of credit under the Prior Facility and/or accelerate amounts due and/or exercise other rights and remedies. In the case of certain events of default related to insolvency and receivership, the commitments of the lenders would be automatically terminated and all outstanding loans would become immediately due and payable.

On May 25, 2007, concurrently with entry into the Prior Facility, Verint entered into a pay-fixed/receive-variable interest rate swap agreement with a multinational financial institution with a notional amount of $450.0 million to mitigate a portion of the risk associated with variable interest rates on the term loan. The original term of the interest rate swap extended through May 2011. However, in July 2010, Verint terminated the interest rate swap in exchange for a payment of $21.7 million to the counterparty, made in August 2010, representing the approximate present value of the expected remaining quarterly settlement payments Verint otherwise would have owed under the swap agreement. Verint recorded a $3.1 million loss on the interest rate swap for the fiscal year ended January 31, 2011. See Note 13, "Derivatives and Financial Instruments" for further details regarding the interest rate swap agreement.

Comverse Ltd. Lines of Credit

As of January 31, 2010, Comverse Ltd., a wholly-owned Israeli subsidiary of Comverse, Inc., had a $25.0 million line of credit with a bank to be used for various performance guarantees to customers and vendors, letters of credit and foreign currency transactions in the ordinary course of business. This line of credit is not available for borrowings. The line of credit bears no interest and is subject to renewal on an annual basis. Comverse Ltd. is required to maintain cash balances with the bank of no less than the capacity under the line of credit at all times regardless of amounts utilized under the line of credit. In June 2010, this line of credit was decreased to $15.0 million with a corresponding decrease in the cash balances Comverse Ltd. was required to maintain with the bank to $15.0 million. In December 2010, this line of credit was further decreased to $10.0 million with a corresponding decrease in the cash balances Comverse Ltd. is required to maintain with the bank to $10.0 million. As of January 31, 2011 and 2010, Comverse Ltd. had utilized $4.0 million and $7.7 million, respectively, of capacity under the line of credit for guarantees and foreign currency transactions.

As of January 31, 2010, Comverse Ltd. had an additional line of credit with a bank for $20.0 million, to be used for borrowings, various performance guarantees to customers and vendors, letters of credit and foreign currency transactions in the ordinary course of business. The line of credit bears no interest other than on borrowings thereunder and is subject to renewal on an annual basis. Borrowings under the line of credit bear interest at an annual rate of LIBOR plus a variable margin determined based on the bank's underlying cost of capital. Comverse Ltd. is required to maintain cash balances with the bank of no less than the capacity under the line of credit at all times regardless of amounts borrowed or utilized under the line of credit. In June 2010, this line of credit was decreased to $15.0 million with a corresponding decrease in the cash balances Comverse Ltd. is required to maintain with the bank to $15.0 million. As of January 31, 2010, Comverse Ltd. had no outstanding borrowings under the line of credit. In December 2010, Comverse Ltd. borrowed and repaid $6.0 million under the line of credit. In January 2011, Comverse Ltd. borrowed $6.0 million under the line of credit which remained outstanding as of January 31, 2011. The weighted-average interest rate on these outstanding borrowings for the fiscal year ended January 31, 2011 was 1.425%. During the fiscal quarter ended April 30, 2011, Comverse Ltd. repaid in full all borrowings under the line of credit. As of January 31, 2011 and 2010, Comverse Ltd. had utilized $7.3 million and $9.8 million, respectively, of capacity under the line of credit for guarantees and foreign currency transactions.

Other than Comverse Ltd.'s requirement to maintain cash balances with the banks as disclosed above, the lines of credit have no financial covenant provisions. These cash balances required to be maintained with the banks were classified within the consolidated balance sheets as "Restricted cash and bank time deposits" as of January 31, 2011 and 2010.

Debt maturities

The Company's debt maturities are as follows:


Fiscal years ending January 31:
(In thousands)
2012	$	8,195
2013		4,593
2014		6,123
2015		572,518

	$	591,429