NOTE 8. LONG-TERM DEBT

Long-term debt at December 31 is as follows:


	2012		2011
	(Dollars in thousands)
Bank debt:
Bank revolving loans	$	—	$	—
U.S. term loans		520,000		520,000
Canadian term loans		81,389		79,323
Euro term loans		443,406		433,825
Other foreign bank revolving and term loans		126,521		97,874

Total bank debt		1,171,316		1,131,022

5% Senior Notes		500,000		—
7¹/₄% Senior Notes, net of unamortized discount		—		245,237

Total debt		1,671,316		1,376,259
Less current portion		255,349		87,776

	$	1,415,967	$	1,288,483

The aggregate annual maturities of our debt (non-U.S. dollar debt has been translated into U.S. dollars at exchange rates in effect at the balance sheet date) are as follows (dollars in thousands):


2013	$	255,349
2014		164,464
2015		214,215
2016		212,268
2017		316,747
Thereafter		508,273

	$	1,671,316

At December 31, 2012, the current portion of our long-term debt consisted of $156.7 million of term loans under our senior secured credit facility due on December 31, 2013 and $98.6 million of foreign bank revolving and term loans.

BANK CREDIT AGREEMENT

On July 28, 2011, we completed the refinancing of our previous senior secured credit facility, or our 2010 Credit Facility, by entering into a new $1.9 billion senior secured credit facility, or the Credit Agreement. Under the Credit Agreement, we borrowed term loans and have available to us revolving loans. The term loans, or the Term Loans, provided under the Credit Agreement refinanced the term loans under our 2010 Credit Facility, certain Euro revolving loan borrowings used to finance the VN acquisition in March 2011 and certain U.S. dollar revolving loan borrowings under our 2010 Credit Facility. The Term Loans consist of $520 million of U.S. term loans, Cdn $81 million of Canadian term loans and €335 million of Euro term loans. The revolving loans, or the Revolving Loans, consist of a $790 million multicurrency revolving loan facility and a Cdn $10 million Canadian revolving loan facility. The Credit Agreement also provides us with an uncommitted multicurrency incremental loan facility for up to an additional $750 million, which may be used to finance acquisitions and for other permitted purposes.

All amounts owed under our 2010 Credit Facility were repaid on July 28, 2011 with proceeds from the Credit Agreement. As a result of the refinancing of our 2010 Credit Facility, we recorded a pre-tax charge of $1.0 million for the loss on early extinguishment of debt.

We had term loan borrowings outstanding under the Credit Agreement of $520.0 million, Cdn $81.0 million and €335.0 million at each of December 31, 2012 and 2011. In aggregate, these amounts totaled U.S. denominated $1,044.8 million and $1,033.1 million at December 31, 2012 and 2011, respectively.

Our Term Loans mature on July 28, 2017, and principal on our Term Loans is required to be repaid in scheduled annual installments as provided in the Credit Agreement beginning in 2013. The Credit Agreement requires us to prepay the Term Loans with proceeds received from certain asset sales and, under certain circumstances, with 50 percent of our excess cash flow. The mandatory repayment provisions are no more restrictive in the aggregate than under our 2010 Credit Facility. Generally, mandatory repayments of Term Loans are allocated pro rata to each of the Term Loans and applied first to the scheduled amortization payments in the year of such repayments and, to the extent in excess thereof, pro rata to the remaining installments of the Term Loans. Voluntary prepayments of Term Loans may be applied to any tranche of Term Loans at our discretion and are applied first to the scheduled amortization payments in the year of such prepayment and thereafter to the next scheduled amortization payment. Amounts repaid under the Term Loans may not be reborrowed.

The Credit Agreement provides us with up to $790 million and Cdn $10 million of Revolving Loans. Amounts outstanding under the revolving loan facilities incur interest at the same rates as the U.S. Term Loans in the case of U.S. dollar denominated Revolving Loans and as the Canadian Term Loans in the case of Canadian dollar denominated Revolving Loans. Euro denominated Revolving Loans would incur interest at the applicable Euribor rate plus the applicable margin, while Revolving Loans in Pounds Sterling would incur interest at the applicable British Bankers Association Interest Settlement Rate plus the applicable margin. Revolving Loans may be used for working capital needs and other general corporate purposes, including acquisitions, dividends, stock repurchases and refinancing of other debt. Revolving Loans may be borrowed, repaid and reborrowed over the life of the Credit Agreement until their final maturity on July 28, 2016. At December 31, 2012 and 2011, there were no revolving loans outstanding under the Credit Agreement. After taking into account letters of credit of $28.1 million, borrowings available under the revolving loan facilities of the Credit Agreement were $761.9 million and Cdn $10.0 million on December 31, 2012.

Under the Credit Agreement, the interest rate for U.S. term loans will be either LIBOR or the base rate under the Credit Agreement plus a margin, the interest rate for Canadian term loans will be either the Bankers’ Acceptance discount rate or the Canadian prime rate under the Credit Agreement plus a margin and the interest rate for Euro term loans will be the Euribor rate under the Credit Agreement plus a margin. At December 31, 2012, the margin for Term Loans and Revolving Loans maintained as LIBOR, Euribor or Bankers’ Acceptance loans was 1.50 percent and the margin for Term Loans and Revolving Loans maintained as base rate or Canadian prime rate loans was 0.50 percent. In accordance with the Credit Agreement, the interest rate margin on all loans will be reset quarterly based upon our Total Leverage Ratio as provided in the Credit Agreement. As of December 31, 2012, the interest rates on U.S term loans, Canadian term loans and Euro term loans were 1.81 percent, 2.74 percent and 1.69 percent, respectively.

The Credit Agreement provides for the payment of a commitment fee ranging from 0.25 percent to 0.375 percent per annum on the daily average unused portion of commitments available under the revolving loan facilities (0.30 percent at December 31, 2012). The commitment fee is reset quarterly based on our Total Leverage Ratio as provided in the Credit Agreement.

We may utilize up to a maximum of $200 million of our multicurrency revolving loan facility under the Credit Agreement for letters of credit as long as the aggregate amount of borrowings of Revolving Loans under the multicurrency revolving loan facility and letters of credit do not exceed the amount of the commitment under such multicurrency revolving loan facility. The Credit Agreement provides for payment to the applicable lenders of a letter of credit fee equal to the applicable margin in effect for Revolving Loans under the multicurrency revolving loan facility and to the issuers of letters of credit of a facing fee of the greater of (x) $500 per annum and (y) 0.25 percent per annum, calculated on the aggregate stated amount of all letters of credit for their stated duration.

For 2012, 2011 and 2010, the weighted average annual interest rate paid on term loans under our respective senior secured credit facilities was 2.2 percent, 2.8 percent and 2.4 percent, respectively; and the weighted average annual interest rate paid on revolving loans under our respective senior secured credit facilities was 1.7 percent, 2.5 percent and 1.5 percent, respectively. We have entered into interest rate swap agreements to convert interest rate exposure from variable rates to fixed rates of interest. For 2012, 2011 and 2010, the weighted average interest rate paid on term loans under our respective senior secured credit facilities after consideration of our interest rate swap agreements was 2.6 percent, 3.3 percent and 3.9 percent, respectively. See Note 9 which includes a discussion of our interest rate swap agreements.

Pursuant to the Credit Agreement, we also have a $750 million multicurrency uncommitted incremental loan facility, of which all of it may be borrowed in the form of term loans or revolving loans, not to exceed $750 million in the aggregate. The uncommitted multicurrency incremental loan facility provides, among other things, that any incremental term loan borrowing shall be denominated in a single currency, either U.S. dollars or certain foreign currencies; have a maturity date no earlier than the maturity date for the Term Loans; and be used for working capital and general corporate purposes, including to finance acquisitions, to refinance any indebtedness assumed as part of such acquisitions, to pay dividends, to repurchase common stock, to refinance or repurchase debt as permitted and to repay outstanding Revolving Loans.

The indebtedness under the Credit Agreement is guaranteed by Silgan and certain of its U.S. and Canadian subsidiaries. The stock of certain of our U.S. subsidiaries has also been pledged as security to the lenders under the Credit Agreement. At December 31, 2012, we had assets of a U.S. Subsidiary of $56.4 million which were restricted and could not be transferred to Silgan or any other subsidiary of Silgan. The Credit Agreement contains certain financial and operating covenants which limit, subject to certain exceptions, among other things, our ability to incur additional indebtedness; create liens; consolidate, merge or sell assets; make certain advances, investments or loans; enter into certain transactions with affiliates; engage in any business other than the packaging business and certain related businesses; pay dividends; and repurchase stock. In addition, we are required to meet specified financial covenants consisting of Interest Coverage and Total Leverage Ratios, each as defined in the Credit Agreement. We are currently in compliance with all covenants under the Credit Agreement.

Because we sell metal containers and closures used in the fruit and vegetable packing process, we have seasonal sales. As is common in the industry, we must utilize working capital to build inventory and then carry accounts receivable for some customers beyond the packing season. Due to our seasonal requirements, which generally peak sometime in the summer or early fall, we may incur short-term indebtedness to finance our working capital requirements. In recent years, our incremental peak seasonal working capital requirements were approximately $325 million, which were funded through a combination of revolving loans under our respective senior secured credit facilities and cash on hand. For 2012, 2011 and 2010, the average amount of revolving loans outstanding under our respective senior secured credit facilities, including seasonal borrowings, was $44.4 million, $113.3 million and $24.4 million, respectively. The 2011 average amount excludes revolving loans used to fund the purchase price for the VN acquisition.

In 2010, we entered into our 2010 Credit Facility to refinance our 2005 credit facility. As a result of this refinancing, we recorded a pre-tax charge of $4.5 million for the loss on early extinguishment debt.

OTHER FOREIGN BANK REVOLVING AND TERM LOANS

We have certain other bank revolving and term loans outstanding in foreign countries. At December 31, 2012, these bank revolving loans allow for total borrowings of up to $164.1 million (translated at exchange rates in effect at the balance sheet date). These bank revolving and term loans bear interest at rates ranging from 1.0 percent to 9.7 percent. For 2012, 2011 and 2010, the weighted average annual interest rate paid on these loans was 3.7 percent, 3.4 percent and 3.1 percent, respectively.

5% SENIOR NOTES

On March 23, 2012, we issued $500 million aggregate principal amount of our 5% Senior Notes due 2020, or the 5% Notes, at 100 percent of their principal amount. The 5% Notes are general unsecured obligations of Silgan, ranking equal in right of payment with Silgan’s unsecured unsubordinated indebtedness and ahead of Silgan’s subordinated debt, if any. The 5% Notes are effectively subordinated to Silgan’s secured debt to the extent of the assets securing such debt and effectively subordinated to all obligations of subsidiaries of Silgan. Interest on the 5% Notes is payable semi-annually in cash on April 1 and October 1 of each year, and the 5% Notes mature on April 1, 2020. Proceeds from the issuance of the 5% Notes were used in April 2012 to redeem all of the outstanding 7¹/₄% Senior Notes due 2016, or the 7¹/₄% Notes, to pay the applicable premium for such redemption, to pay related fees and expenses and for general corporate purposes.

The 5% Notes are redeemable, at the option of Silgan, in whole or in part, at any time after April 1, 2016 at the following redemption prices (expressed in percentages of principal amount) plus accrued and unpaid interest thereon to the redemption date if redeemed during the twelve month period commencing April 1, of the years set forth below:


Year		Redemption Price
2016		102.500%
2017		101.250%
2018 and thereafter		100.000%

In addition, prior to April 1, 2015, we may redeem up to 35 percent of the aggregate principal amount of the 5% Notes from the proceeds of certain equity offerings at a redemption price of 105 percent of their principal amount, plus accrued and unpaid interest to the date of redemption. We may also redeem the 5% Notes, in whole or in part, prior to April 1, 2016 at a redemption price equal to 100 percent of their principal amount plus a make-whole premium as provided in the indenture for the 5% Notes.

Upon the occurrence of a change of control, as defined in the indenture for the 5% Notes, Silgan is required to make an offer to purchase the 5% Notes at a purchase price equal to 101 percent of their principal amount, plus accrued and unpaid interest to the date of purchase.

The indenture for the 5% Notes contains covenants which are generally less restrictive than those under the Credit Agreement.

7¹/₄% SENIOR NOTES

On April 9, 2012, we redeemed all $250 million aggregate principal amount of our outstanding 7¹/₄% Notes at a redemption price of 112.3715 percent of their principal amount, or $280.9 million, plus accrued and unpaid interest up to the redemption date. As a result, during the second quarter of 2012, we recorded a loss on early extinguishment of debt of $38.7 million for the premium paid in connection with this redemption and for the write-off of unamortized debt issuance costs and discount.

6³/₄% SENIOR SUBORDINATED NOTES

In 2010, we redeemed all $200 million principal amount of our outstanding 6³/₄% Senior Subordinated Notes due 2013, or the 6³/₄% Notes. The redemption price was 101.125 percent of the principal amount, or $202.3 million, plus accrued and unpaid interest up to the redemption date. As permitted under the 2010 Credit Facility and the other documents governing our indebtedness, we funded the redemption with borrowings under the 2010 Credit Facility and cash on hand. As a result, in 2010, we recorded a loss on early extinguishment of debt of $3.0 million for the premium paid in connection with this redemption and for the write-off of unamortized debt issuance costs.