9. DEBT

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


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

Total debt	$	600,429	$	623,107

Less: current portion		—		22,678

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

Convertible Debt Obligations

As of July 31, 2010 and January 31, 2010, CTI had $2.2 million aggregate principal amount of outstanding Convertible Debt Obligations (the "Convertible Debt Obligations"). The Convertible Debt Obligations are not secured by any assets of the Company and are not guaranteed by any of CTI's subsidiaries.

Each $1,000 principal amount of the Convertible Debt Obligations is convertible, at the option of the holder upon certain circumstances, 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.

The Convertible Debt Obligations are convertible upon the occurrence of certain events, including 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. On August 19, 2010, S&P discontinued rating the Convertible Debt Obligations at which time they became convertible.

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 Systems Inc. ("Witness"). On April 29, 2011, Verint (i) entered into a credit agreement (the "New Credit Agreement") with a group of lenders (the "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 six months ended July 31, 2010. For a discussion of the terms of the New Credit Agreement (see Note 21, 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 credit facility that were scheduled to mature on May 25, 2014 and May 25, 2013, respectively.

Verint's $25.0 million revolving credit facility 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. In July 2010, the Prior Facility was amended, as discussed further below. As part of the amendments, the borrowing capacity under the revolving credit facility was increased to $75.0 million. During the three months ended January 31, 2009, Verint borrowed the full $15.0 million then available under the revolving credit facility, which Verint repaid during the fiscal quarter ended January 31, 2011.

In May 2010, Verint made a $22.1 million mandatory "excess cash flow" payment on the term loan, based upon its operating results for the fiscal year ended January 31, 2010, $12.4 million of which were to be applied to the eight immediately following principal payments and $9.7 million of which were to be applied pro rata to the remaining principal payments.

The Prior Facility 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 for a thirty-day period to cure such default, or an event of default would occur.

On April 27, 2010, Verint entered into an amendment to the Prior Facility that extended 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 approximately $0.9 million to its lenders which was included within deferred debt related costs and was subject to amortization as additional interest expense over the remaining term of the Prior Facility using the effective interest method. Legal fees and other out-of-pocket costs directly relating to the amendment, which were expensed as incurred, were not significant. Verint filed its Annual Report on Form 10-K for the fiscal year ended January 31, 2010 containing the requisite financial statements on May 19, 2010 and, accordingly, delivered its audited consolidated financial statements to the lenders in compliance with the amended terms of the Prior Facility.

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. Under the Prior Facility, the consolidated leverage ratio was not permitted to exceed 3.50:1 for the quarterly periods ended April 30, 2010 and January 31, 2010, and Verint was in compliance with such requirements. 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, October 31, 2010 and July 31, 2010, Verint was in compliance with such requirements.

In July 2010, the Prior Facility was amended to, among other things, (i) change the method of calculation of the applicable interest rate margin to be based on Verint's periodic consolidated leverage ratio, (ii) add a London Interbank Offered Rate ("LIBOR") floor of 1.50%, (iii) change certain negative covenants, including providing covenant relief with respect to the permitted consolidated leverage ratio, and (iv) 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 credit facility from $15.0 million to $75.0 million. The commitment fee for unused capacity under the revolving credit facility 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 subject to amortization over the remaining contractual term of the Prior Facility. 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.

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 (see Note 10, Derivatives and Financial Instruments, for further details regarding the interest rate swap agreement). The original term of the interest rate swap agreement extended through May 2011. However, on July 30, 2010, Verint terminated the interest rate swap agreement in exchange for a payment of $21.7 million to the counterparty, made on August 3, 2010, representing the approximate present value of the expected remaining quarterly settlement payments Verint otherwise would have owed under the interest rate swap agreement. This obligation was reflected within "Other current liabilities" as of July 31, 2010.

Verint incurred interest expense on borrowings under the Prior Facility of $4.9 million and $10.3 million during the three and six months ended July 31, 2010, respectively, and $5.7 million and $11.5 million during the three and six months ended July 31, 2009, respectively. Verint also recorded $0.8 million and $1.3 million during the three and six months ended July 31, 2010, respectively, for amortization of its deferred debt issuance cost, which is reported within interest expense, inclusive of a $0.3 million write-off associated with the $22.1 million term loan principal payment made in May 2010. Amortization of Verint's deferred debt issuance costs during the three and six months ended July 31, 2009 was $0.5 million and $1.0 million, respectively.

As of July 31, 2010, the interest rates on the term loan and the revolving credit facility were 5.25% and 6.00%, respectively. The interest rate on the revolving credit facility reset to 5.25% as of August 4, 2010. The interest rate on both the term loan and the revolving credit facility was 3.49% as of January 31, 2010. The higher interest rates as of July 31, 2010 reflect, among other things, the impact of the July 2010 amendments discussed above.

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. was required to maintain with the bank to $10.0 million. In June 2011, the line of credit increased to $20.0 million with a corresponding increase in the cash balances Comverse Ltd. is required to maintain with the bank to $20.0 million. As of July 31, 2010 and January 31, 2010, Comverse Ltd. had utilized $7.0 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. 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 was repaid during the three months ended April 30, 2011. As of July 31, 2010 and January 31, 2010, Comverse Ltd. had no outstanding borrowings under the line of credit, but had utilized $9.4 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 condensed consolidated balance sheets as "Restricted cash and bank time deposits" as of July 31, 2010 and January 31, 2010.