LONG-TERM DEBT

12 Months Ended

Oct. 31, 2020

NOTE 7 - LONG-TERM DEBT

Long-term debt consists of the following:

	October 31, 2020			October 31, 2019

Project Loans	$	50,063		$	34,490
Working Capital Loans (value added tax component)		13,887			9,539

		63,950			44,029
Current portion of long-term debt		(8,970	)		(2,142	)

Long-term debt	$	54,980		$	41,887

At October 31, 2020, maturities of our long-term debt over the next five fiscal years and thereafter were as follows:

2021	$	8,970
2022		15,142
2023		13,406
2024		9,789
2025		9,432
Thereafter		7,211
	$	63,950

As of October 31, 2020 and October 31, 2019, the weighted-average interest rates of our short-term debt were 2.02% and 3.84%, respectively. Interest payments, including capitalized interest of $0.1 million in fiscal 2020, were $2.6 million in fiscal 2020 and 2019, and $1.9 million in fiscal 2018.

Xiamen Project Loans

In November 2018, PDMCX was approved for credit of 345 million RMB (approximately $51.4 million, at the balance sheet date), 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 RMB, are being used to finance certain capital expenditures in China. PDMCX granted liens on its interest in land, building, and certain equipment, which had a combined carrying value of $94.5 million as of October 31, 2020, as collateral for the Project Loans. As of October 31, 2020, PDMCX had outstanding borrowings of 336.0 million RMB ($50.1 million) against this approval. Payments on these borrowings are due semiannually through December 2025; an initial payment of 9.0 million RMB ($1.3 million) was made in June 2020. The table below presents, in U.S. dollars, the timing of future payments against the borrowings.

	Fiscal Year
	2021		2022		2023		2024		2025		2026
Principal payments	$	6,705	$	7,334	$	9,592	$	9,789	$	9,432	$	7,211

The interest rates on the Project Loans are variable and are based on the RMB Loan Prime Rate of the National Interbank Funding Center (4.9% at October 31, 2020). Interest incurred on the loans is eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit.

The Company has covenants and provisions in its Project loans, certain of which relate to the assets pledged as security for these agreements; the Company was not in compliance with those provisions as of October 31, 2020. The Company obtained waivers for all specified noncompliance.

Hefei Equipment Loan

In October 2020, we were approved to borrow 200 million RMB (approximately $29.8 million) from the China Construction Bank Corporation. We received initial proceeds of 41 million RMB (approximately $6.2 million) against this approval in November 2020. Loan proceeds have been, and will be, used for the purchase of two lithography tools at our facility in Hefei, China. The interest rate on the loan is variable and based on the RMB Loan Prime Rate of the National Interbank Funding Center less 0.45% (adjusted annually), and is to be repaid semiannually, over five years, commencing on March 5, 2022. The interest rate on the loan was 4.2% at the borrowing date. The first five semiannual loan repayments will each be for 7.5 percent of the approved 200 million RMB loan principal; the last five installments will each be for 12.5 percent of the approved loan principal, with the final installment due on September 30, 2026. Semiannual repayments of the initial $6.2 million borrowed will commence on March 5, 2022, with a repayment of $2.3 million; subsequent semiannual repayments will be in the amounts of $2.3 million and $1.6 million. The borrowings are secured by the Hefei facility, its related land use right, and certain manufacturing equipment, which had a combined carrying value of $87.8 million as of October 31, 2020.

Xiamen Working Capital Loans

In November 2018, PDMCX received approval for unsecured credit of the equivalent of $25.0 million, pursuant to which PDMCX may enter into separate loan agreements. Under this credit agreement (the “Working Capital Loans”), PDMCX can borrow up to 140.0 million RMB to pay value-added taxes (“VAT”), and up to 60.0 million RMB to fund operations; combined total borrowings are limited to the equivalent of $25.0 million. As of October 31, 2020, PDMCX had 93.2 million RMB ($13.9 million) outstanding against the approval to pay VAT. Payments on these borrowings are due semiannually, in increasing amounts, through July 2023. The table below presents, in U.S. dollars, the timing of future payments against these borrowings.

	Fiscal Year
	2021		2022		2023
Principal payments	$	2,265	$	7,808	$	3,814

As of October 31, 2020, PDMCX had 8.0 million RMB ($1.2 million) outstanding against the approval to fund operations; repayments are due one year from the borrowing dates; as such, we have classified this borrowing as short-term debt.

At October 31, 2020, the interest rate on the borrowing to fund operations is 4.6%, and interest rates on borrowings to pay VAT are approximately 4.53 to 4.61%; both rates are variable and are based on the RMB Loan Prime Rate of the National Interbank Funding Center, plus spreads that range from 40.00 to 76.00 basis points. Interest incurred on the VAT loans are eligible for reimbursement through incentives provided by the Xiamen Torch Hi-Tech Industrial Development Zone, which provide for such reimbursements up to a prescribed limit.

U.S. Equipment Loan #1

Effective July 2019, the Company entered into a Master Lease Agreement (“MLA”) which enables us to request advance payments or other funds to finance equipment to be leased or purchased in the U.S. In connection with this MLA, we were approved for financing of $35 million for the purchase of a high-end lithography tool. In the fourth quarter of fiscal 2019, the financing entity, upon our request, made an advance payment of $3.5 million to the equipment vendor on our behalf. Interest on this borrowing is variable and payable monthly at thirty-day LIBOR plus 1% (1.15% at October 31, 2020), and will continue to accrue until the borrowing is repaid or, as allowed under the MLA, we enter into a lease for the equipment. We intend to enter into a lease agreement for the related equipment in fiscal year 2021; as such, we have classified this borrowing as short-term debt. All borrowings under the MLA are secured by the equipment to be leased or purchased. During the first quarter of fiscal 2021, this financing entity made an additional payment of $28 million to the equipment vendor on our behalf.

U.S. Equipment Loan #2

In October 2020, we entered into a Master Lease Agreement with a financing entity for the lease of an inspection tool with a maximum value of $10 million. The tool was delivered during the fourth quarter of fiscal year 2020, and the financing entity made a progress payment to the vendor of $6.5 million in the first quarter of fiscal year 2021. The progress payment will accrue interest at 1.56% payable monthly until the final payment for the tool is made, at which time the lease will begin.

Corporate Credit Agreement

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 covenants around minimum interest coverage ratio, total leverage ratio, and minimum unrestricted cash balance (all of which we were in compliance with at October 31, 2020), and limits the amount of cash dividends, distributions, and redemptions we can pay on our common stock to an aggregate annual amount of $50 million. We had no outstanding borrowings against the Credit Agreement at October 31, 2020, and $50 million was available for borrowing. The interest rate on the Credit Agreement (1.14% at October 31, 2020) is based on our total leverage ratio at LIBOR plus a spread, as defined in the Credit Agreement.

3.25% Convertible Senior Notes

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. In April 2019, the entire $57.5 million principal amount was repaid upon maturity.