DEBT

9 Months Ended

Jul. 28, 2019

NOTE 5 – DEBT

Debt consists of the following:

	July 28, 2019			October 31, 2018

Project Loans	$	35,419		$	-
Working Capital Loans		13,696			-
3.25% convertible senior notes matured April 2019		-			57,453

		49,115			57,453
Current portion		(6,100	)		(57,453	)

	$	43,015		$	-

In November 2018, PDMCX was approved for credit of $50 million, subject to certain limitations related to PDMCX registered capital at the time of the initial approval, pursuant to which PDMCX has and will enter into separate loan agreements (“the Project Loans”) for intermittent borrowings. The Project Loans, which are denominated in Chinese renminbi (RMB), are being used to finance certain capital expenditures in China. PDMCX granted liens on its land, building, and certain equipment as collateral for the Project Loans. As of July 28, 2019, PDMCX had borrowed 243.4 million RMB ($35.4 million) against this approval, which includes $9.6 million borrowed during the three-month period ended July 28, 2019. Payments on these borrowings are due semi-annually through December 2025; the initial payment is scheduled for June 2020. The table below presents, in U.S. dollars, the timing of future payments against the borrowings.

	Fiscal Year
	2020 (all within one year of July 28, 2019)		2021		2022		2023		2024		2025		2026

Principal payments	$	1,310	$	6,548	$	5,838	$	3,533	$	6,766	$	6,476	$	4,948

The interest rates on the Project Loans are based on the benchmark lending rate of the People’s Bank of China (4.9% at July 28, 2019). Interest incurred on the loans will be reimbursed through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit.

In November 2018, PDMCX received approval for unsecured credit of $25.0 million, pursuant to which PDMCX may enter into separate loan agreements. Under this credit agreement (the “Working Capital Loan”), PDMCX can borrow up to 140.0 million RMB, or approximately $20.4 million, to pay value-added taxes (“VAT”) and up to 60.0 million RMB ($8.7 million) to fund operations; combined total borrowings are limited to $25.0 million. Through July 28, 2019, PDMCX borrowed 68.0 million RMB ($9.9 million) to pay VAT. Payments on these borrowings are due semiannually, at an increasing rate, through January 2022; PDMCX made installment payments totaling $0.1 million during the three-month period ended July 28, 2019. The table below presents, in U.S. dollars, the timing of future payments against these borrowings.

	Fiscal Year 2020 (all within one year of July 28, 2019)		Fiscal Year 2021		Fiscal Year 2022

Principal payments	$	890	$	1,979	$	6,927

In addition, during the quarter ended July 28, 2019, PDMCX borrowed 11.4 million RMB ($3.9 million) against this approval to fund operations, with repayments due one year from the borrowing dates.

The interest rates on borrowings to fund operations is approximately 4.6% and interest rates on borrowings to pay VAT are approximately 5.0%; both rates are based on the RMB Loan Prime Rate of the National Interbank Funding Center, plus a spread of 67.75 basis points. Interest incurred on the loans will be reimbursed through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit.

In January 2015, we privately exchanged $57.5 million in aggregate principal amount of our 3.25% convertible senior notes with a maturity date of April 1, 2016, for new 3.25% convertible senior notes with an aggregate principal amount of $57.5 million with a maturity date of April 1, 2019. The conversion rate of the new notes was the same as that of the exchanged notes, which were issued in March 2011 with a conversion rate of approximately 96 shares of common stock per $1,000 note principal, equivalent to a conversion price of $10.37 per share of common stock. In April 2019, the entire $57.5 million principal amount was repaid upon maturity.

In September 2018, we entered into a five-year amended and restated credit agreement (“the credit agreement”), which has a $50 million borrowing limit, with an expansion capacity to $100 million. The credit agreement is secured by substantially all of our assets located in the United States and common stock we own in certain foreign subsidiaries. The credit agreement includes minimum interest coverage ratio, total leverage ratio, and minimum unrestricted cash balance covenants (all of which we were in compliance with at July 28, 2019), and limits the amount of dividends, distributions, and redemptions we can pay on our stock to an aggregate amount of $100 million. We had no outstanding borrowings against the credit agreement at July 28, 2019, and $50 million was available for borrowing. The interest rate on the credit agreement (2.5% at July 28, 2019) is based on our total leverage ratio at LIBOR plus a spread, as defined in the credit agreement.

Effective July 25, 2019, the Company entered into a Master Lease Agreement (“MLA”) which enables us to request advance payments or other funds for equipment or enter into an equipment lease in the U.S. In connection with this MLA, we were approved for financing of $35 million for the purchase of equipment; as of July 28, 2019, we had no outstanding borrowings against this MLA. In the fourth quarter of fiscal 2019, the financing entity, upon our request, made an advance payment of $3.4 million to an equipment vendor on our behalf. Interest on this borrowing is payable monthly at thirty-day LIBOR plus 1%, and will continue to accrue until the borrowing is repaid or, as allowed under the MLA, we enter into a lease for the equipment. All borrowings under the MLA are secured by the equipment purchased or financed.