DEBT AND CREDIT SOURCES

The following table summarizes the Company's outstanding debt as of July 1, 2012 and the related maturity dates:



			Payments Due by Period
(In thousands)	Face Value		2012 (remaining six months)		2013		2014		2015		2016		Beyond 2016
Convertible debt:
4.50% debentures	$	250,000	$	—	$	—	$	—	$	250,000	$	—	$	—
4.75% debentures	230,000		—		—		230,000		—		—		—
0.75% debentures	79		—		—		—		79		—		—
IFC mortgage loan	75,000		—		12,500		15,000		15,000		15,000		17,500
CEDA loan	30,000		—		—		—		—		—		30,000
Credit Agricole revolving credit facility	275,000		—		275,000		—		—		—		—
Other debt (1) (2)	14,919		13,861		—		—		—		—		1,058
	$	874,998	$	13,861	$	287,500	$	245,000	$	266,147	$	15,000	$	48,558

(1)

As of July 1, 2012, Other debt included a non-recourse project loan of $13.9 million taken in the second quarter of fiscal 2012 for a utility and power plant project under construction, classified as "Short-term debt" and $1.1 million of project loans related to Tenesol, classified as "Long-term debt" on the Company's Condensed Consolidated Balance Sheets. On January 31, 2012, the Company completed its acquisition of Tenesol. In fiscal 2003 and fiscal 2008 Tenesol entered into three non-recourse project loans which are scheduled to mature through 2028. As of January 1, 2012 the other debt balance consisted of outstanding borrowings of $1.2 million which is classified as "Long-term debt" in the Company's Condensed Consolidated Balance Sheets.


(2)	The balance of Other long-term debt excludes payments related to capital leases which are disclosed in Note 8. "Commitments and Contingencies" to these condensed consolidated financial statements.

Convertible Debt

The following table summarizes the Company's outstanding convertible debt (which is additionally reflected in the table above):



	July 1, 2012						January 1, 2012
(In thousands)	Carrying Value		Face Value		Fair Value (1)		Carrying Value		Face Value		Fair Value (1)
4.50% debentures	$	200,554	$	250,000	$	207,803	$	193,189	$	250,000	$	205,905
4.75% debentures	230,000		230,000		205,850		230,000		230,000		200,967
1.25% debentures (2)	—		—		—		196,710		198,608		197,615
0.75% debentures	79		79		79		79		79		79
	$	430,633	$	480,079	$	413,732	$	619,978	$	678,687	$	604,566


(1)	The fair value of the convertible debt was determined using Level 1 inputs based on quoted market prices as reported by an independent pricing source.


(2)	On February 16, 2012, the Company repurchased 100% of the outstanding principal amount of the 1.25% debentures plus accrued and unpaid interest.

4.50% Debentures

On April 1, 2010, the Company issued $220.0 million in principal amount of its 4.50% senior cash convertible debentures ("4.50% debentures"). On April 5, 2010, the initial purchasers of the 4.50% debentures exercised the $30.0 million over-allotment option in full. Interest is payable semi-annually, on March 15 and September 15 of each year, at a rate of 4.50% per annum which commenced on September 15, 2010. The 4.50% debentures mature on March 15, 2015 unless repurchased or converted in accordance with their terms prior to such date. The 4.50% debentures are convertible only into cash, and not into shares of the Company's common stock (or any other securities).

The embedded cash conversion option within the 4.50% debentures and the over-allotment option related to the 4.50% debentures are derivative instruments that are required to be separated from the 4.50% debentures and accounted for separately as derivative instruments (derivative liabilities) with changes in fair value reported in the Company's Condensed Consolidated Statements of Operations until such transactions settle or expire. The over-allotment option was settled on April 5, 2010, however, the embedded cash conversion option continues to require mark-to-market treatment. The initial fair value liabilities of the embedded cash conversion option and over-allotment option were classified within "Other long-term liabilities" and simultaneously reduced the carrying value of "Convertible debt, net of current portion" in the Company's Condensed Consolidated Balance Sheet.

During the three and six months ended July 1, 2012, the Company recognized a non-cash loss of $0.1 million and $1.7 million, respectively, recorded in "Gain (loss) on mark-to-market derivatives" in the Company's Condensed Consolidated Statement of Operations related to the change in fair value of the embedded cash conversion option. In the three and six months ended July 3, 2011, the Company recognized a non-cash loss of $9.7 million and $31.6 million, respectively, recorded in "Gain (loss) on mark-to-market derivatives" in the Company's Condensed Consolidated Statement of Operations related to the change in fair value of the embedded cash conversion option. The fair value liability of the embedded cash conversion option as of July 1, 2012 and January 1, 2012 totaled $2.5 million and $0.8 million, respectively, and is classified within "Other long-term liabilities" in the Company's Condensed Consolidated Balance Sheets.

The embedded cash conversion option is fair valued utilizing Level 2 inputs consisting of the exercise price of the instrument, the Company's common stock price and volatility, the risk free interest rate and the contractual term. Such derivative instruments are not traded on an open market as the banks are the counterparties to the instruments.

Significant inputs for the valuation of the embedded cash conversion option are as follows:



	As of (1)
	July 1, 2012			January 1, 2012
Stock price	$	4.80		$	6.23
Exercise price	$	22.53		$	22.53
Interest rate	0.59		%	0.84		%
Stock volatility	59.60		%	44.00		%
Maturity date	February 18, 2015			February 18, 2015


(1)	The valuation model utilizes these inputs to value the right but not the obligation to purchase one share at $22.53. The Company utilized a Black-Scholes valuation model to value the embedded cash conversion option. The underlying input assumptions were determined as follows:


(i)	Stock price. The closing price of the Company's common stock on the last trading day of the quarter.


(ii)	Exercise price. The exercise price of the embedded conversion option.


(iii)	Interest rate. The Treasury Strip rate associated with the life of the embedded conversion option.


(iv)	Stock volatility. The volatility of the Company's common stock over the life of the embedded conversion option.

Call Spread Overlay with Respect to 4.50% Debentures ("CSO2015")

Concurrent with the issuance of the 4.50% debentures, the Company entered into privately negotiated convertible debenture hedge transactions (collectively, the "4.50% Bond Hedge") and warrant transactions (collectively, the "4.50% Warrants" and together with the 4.50% Bond Hedge, the “CSO2015”), with certain of the initial purchasers of the 4.50% cash convertible debentures or their affiliates. The CSO2015 transactions represent a call spread overlay with respect to the 4.50% debentures, whereby the cost of the 4.50% Bond Hedge purchased by the Company to cover the cash outlay upon conversion of the debentures is reduced by the sales prices of the 4.50% Warrants. Assuming full performance by the counterparties (and 4.50% Warrants strike prices in excess of the conversion price of the 4.50% debentures), the transactions effectively reduce the Company's potential payout over the principal amount on the 4.50% debentures upon conversion of the 4.50% debentures.

Under the terms of the 4.50% Bond Hedge, the Company bought from affiliates of certain of the initial purchasers options to acquire, at an exercise price of $22.53 per share, subject to customary adjustments for anti-dilution and other events, cash in an amount equal to the market value of up to 11.1 million shares of the Company's common stock. Under the terms of the original 4.50% Warrants, as amended and restated on December 23, 2010, the Company sold to affiliates of certain of the initial purchasers of the 4.50% cash convertible debentures warrants to acquire, at an exercise price of $27.03 per share, subject to customary adjustments for anti-dilution and other events, up to 11.1 million shares of the Company's common stock. Each 4.50% Bond Hedge and 4.50% Warrant transaction is a separate transaction, entered into by the Company with each counterparty, and is not part of the terms of the 4.50% debentures. According to the counterparties to the warrants, the consummation of the Total Tender Offer triggered their rights to make a downward adjustment to the strike price of the warrants. In the third quarter of fiscal 2011, the Company and the counter parties to the 4.50% Warrants agreed to reduce the exercise price of the 4.50% Warrants from $27.03 to $24.00.

The 4.50% Bond Hedge, which is indexed to the Company's common stock, is a derivative instrument that requires mark-to-market accounting treatment due to the cash settlement features until such transactions settle or expire. The initial fair value of the 4.50% Bond Hedge was classified as "Other long-term assets" in the Company's Condensed Consolidated Balance Sheets.

During the three and six months ended July 1, 2012, the Company recognized a non-cash gain of $0.1 million and $1.7 million, respectively, in "Gain (loss) on mark-to-market derivatives" in the Company's Condensed Consolidated Statement of Operations related to the change in fair value of the 4.50% Bond Hedge. In the three and six months ended July 3, 2011, the Company recognized a non-cash gain of $9.6 million and $31.5 million, respectively, in "Gain (loss) on mark-to-market derivatives" in the Company's Condensed Consolidated Statement of Operations related to the change in fair value of the 4.50% Bond Hedge. The fair value of the 4.50% Bond Hedge as of July 1, 2012 and January 1, 2012 totaled $2.5 million and $0.8 million, respectively, and is classified within "Other long-term assets" in the Company's Condensed Consolidated Balance Sheets.

The 4.50% Bond Hedge derivative instruments are fair valued utilizing Level 2 inputs consisting of the exercise price of the instruments, the Company's common stock price and volatility, the risk free interest rate and the contractual term. Such derivative instruments are not traded on an open market. Valuation techniques utilize the inputs described above in addition to liquidity and institutional credit risk inputs.

Significant inputs for the valuation of the 4.50% Bond Hedge are as follows:



	As of (1)
	July 1, 2012			January 1, 2012
Stock price	$	4.80		$	6.23
Exercise price	$	22.53		$	22.53
Interest rate	0.59		%	0.84		%
Stock volatility	59.60		%	44.00		%
Credit risk adjustment	2.06		%	1.93		%
Maturity date	February 18, 2015			February 18, 2015


(1)	The valuation model utilizes these inputs to value the right but not the obligation to purchase one share at $22.53 for the 4.50% Bond Hedge. The Company utilized a Black-Scholes valuation model to value the 4.50% Bond Hedge. The underlying input assumptions were determined as follows:


(i)	Stock price. The closing price of the Company's common stock on the last trading day of the quarter.


(ii)	Exercise price. The exercise price of the 4.50% Bond Hedge.


(iii)	Interest rate. The Treasury Strip rate associated with the life of the 4.50% Bond Hedge.


(iv)	Stock volatility. The volatility of the Company's common stock over the life of the 4.50% Bond Hedge.


(v)	Credit risk adjustment. Represents the weighted average of the credit default swap rate of the counterparties.

1.25% Debentures

In February 2007, the Company issued $200.0 million in principal amount of its 1.25% senior convertible debentures and received net proceeds of $194.0 million. During the fourth quarter of fiscal 2008, the Company received notices for the conversion of $1.4 million in principal amount of the 1.25% debentures which it settled for $1.2 million in cash and 1,000 shares of common stock. As of January 1, 2012, an aggregate principal amount of $198.6 million of the 1.25% debentures remained issued and outstanding. The 1.25% debentures had a maturity date of February 15, 2027 unless repurchased or converted in accordance with their terms prior to such date. Holders had the option to require the Company to repurchase all or a portion of their 1.25% debentures on each of February 15, 2012, February 15, 2017 and February 15, 2022, or if the Company experiences certain types of corporate transactions constituting a fundamental change, as defined in the indenture governing the 1.25% debentures. In addition, the Company could redeem some or all of the 1.25% debentures on or after February 15, 2012. Accordingly, the Company classified the 1.25% debentures as short-term liabilities in the Condensed Consolidated Balance Sheets as of January 1, 2012. On February 16, 2012, based upon the exercise of the holders' put rights, the Company repurchased $198.6 million in principal amount of the 1.25% debentures at a cash price of $199.8 million, representing 100% of the principal amount of the 1.25% debentures plus accrued and unpaid interest. None of the 1.25% debentures remained issued and outstanding after the repurchase.

Mortgage Loan Agreement with IFC

On May 6, 2010, SunPower Philippines Manufacturing Ltd. ("SPML") and SPML Land, Inc. ("SPML Land"), both subsidiaries of the Company, entered into a mortgage loan agreement with IFC. Under the loan agreement, SPML may borrow up to $75.0 million from IFC, after satisfying certain conditions to disbursement, and SPML and SPML Land pledged certain assets as collateral supporting SPML's repayment obligations. The Company guaranteed SPML's obligations to IFC.

Under the loan agreement, SPML may borrow up to $75.0 million during the first two years, and SPML shall repay the amount borrowed, starting 2 years after the date of borrowing, in 10 semiannual installments over the following 5 years. SPML shall pay interest of LIBOR plus 3% per annum on outstanding borrowings, and a front-end fee of 1% on the principal amount of borrowings at the time of borrowing, and a commitment fee of 0.5% per annum on funds available for borrowing and not borrowed. SPML may prepay all or a part of the outstanding principal, subject to a 1% prepayment premium. The loan agreement includes conditions to disbursements, representations, covenants, and events of default customary for financing transactions of this type. Covenants in the loan agreement include, but are not limited to, requirements that the Company maintain certain financial ratios including defined current ratios, restrictions on SPML's ability to issue dividends, incur indebtedness, create or incur liens on assets, and make loans to or investments in third parties. Additionally, in accordance with the terms of the mortgage loan agreement, the Company is required to establish a debt service reserve account which shall contain the amount, as determined by IFC, equal to the aggregate principal and interest due on the next succeeding interest payment date after such date. As of July 1, 2012 and January 1, 2012, the Company had restricted cash and cash equivalents of $1.4 million and $1.3 million, respectively, related to the IFC debt service reserve.

As of July 1, 2012, SPML had $75.0 million outstanding under the mortgage loan agreement, of which $5.0 million is classified as "Short-term debt" as it is due in the next twelve months and $70.0 million is classified as "Long-term debt" in the Company's Condensed Consolidated Balance Sheets. As of January 1, 2012, the $75.0 million outstanding under this loan agreement is classified as "Long-term debt" in the Company's Condensed Consolidated Balance Sheets.

August 2011 Letter of Credit Facility with Deutsche Bank

On August 9, 2011, the Company entered into a letter of credit facility agreement with Deutsche Bank, as issuing bank and as administrative agent, and certain financial institutions, which was amended on December 20, 2011. Payment of obligations under the letter of credit facility is guaranteed by Total S.A. pursuant to the Credit Support Agreement. The letter of credit facility provides for the issuance, upon request by the Company, of letters of credit by the issuing banks thereunder in order to support certain obligations of the Company, in an aggregate amount not to exceed (a) $725.0 million until December 31, 2012; and (b) $771.0 million for the period from January 1, 2013 through December 31, 2013. Aggregate letter of credit amounts may be increased upon the agreement of the parties but, otherwise, may not exceed (i) $878.0 million for the period from January 1, 2014 through December 31, 2014; (ii) $936.0 million for the period from January 1, 2015 through December 31, 2015; and (iii) $1.0 billion for the period from January 1, 2016 through June 28, 2016.

As of July 1, 2012, letters of credit issued under the August 2011 letter of credit facility with Deutsche Bank totaled $699.0 million.

September 2011 Letter of Credit Facility with Deutsche Bank Trust

On September 27, 2011, the Company entered into a letter of credit facility with Deutsche Bank Trust which provides for the issuance, upon request by the Company, of letters of credit to support obligations of the Company in an aggregate amount not to exceed $200.0 million. Each letter of credit issued under the facility is fully cash-collateralized and the Company has entered into a security agreement with Deutsche Bank Trust, granting them a security interest in a cash collateral account established for this purpose.

As of July 1, 2012 letters of credit issued under the Deutsche Bank Trust facility amounted to $1.4 million which were fully collateralized with restricted cash on the Condensed Consolidated Balance Sheets.

September 2011 Revolving Credit Facility with Credit Agricole

On September 27, 2011, the Company entered into a revolving credit agreement with Credit Agricole, as administrative agent, and certain financial institutions, under which the Company may borrow up to $275.0 million until September 27, 2013. Amounts borrowed may be repaid and reborrowed until September 27, 2013.

The Company is required to pay interest on outstanding borrowings of (a) with respect to any LIBOR loan, 1.5% plus the LIBOR divided by a percentage equal to one minus the stated maximum rate of all reserves required to be maintained against "Eurocurrency liabilities" as specified in Regulation D; (b) with respect to any alternative base loan, 0.5% plus the greater of (1) the prime rate, (2) the Federal Funds rate plus 0.5%, and (3) the one month LIBOR plus 1%; (c) a commitment fee equal to 0.25% per annum on funds available for borrowing and not borrowed; (d) an upfront fee of 0.125% of the revolving loan commitment; and (e) arrangement fee customary for a transaction of this type.

As of January 1, 2012, $250.0 million was outstanding under the revolving credit facility with Credit Agricole which amount is classified as "Long-term debt" on the Company's Condensed Consolidated Balance Sheets. In the first quarter of fiscal 2012, the Company repaid $100.0 million of outstanding borrowings plus fees. On April 9, 2012, the Company drew down $125.0 million.

As of July 1, 2012, $275.0 million was outstanding under the revolving credit facility with Credit Agricole which amount is classified as "Long-term debt" on the Company's Condensed Consolidated Balance Sheets.

Liquidity Support Agreement with Total S.A.

On February 28, 2012, the Company entered into a Liquidity Support Agreement with Total S.A. and the DOE, and a series of related agreements with Total S.A. and Total, under which Total S.A. has agreed to provide the Company, or cause to be provided, additional liquidity under certain circumstances to a maximum amount of $600.0 million. In return for Total S.A.'s agreement to provide the Liquidity Support Facility, on February 28, 2012, the Company issued to Total a seven-year warrant to purchase 9,531,677 shares of the Company's common stock at an exercise price of $7.8685 per share. The fair value of the warrants upon issuance was $50.3 million, which is recorded as capitalized financing costs on the Condensed Consolidated Balance Sheet and amortized as interest expense over the expected life of the agreement. In connection with the Liquidity Support Agreement, the Company also entered into a Compensation and Funding Agreement with Total S.A., and a Private Placement Agreement and a Revolving Credit and Convertible Loan Agreement with Total (see Note 2). As of July 1, 2012, there was no amount outstanding under this facility.

Other Debt and Credit Sources

There has been no significant change in the Company's remaining debt balance, composition or terms since the end of the most recently completed fiscal year end other than as described above. Additional details regarding the Company's debt arrangements may be referenced from the Company's annual consolidated financial statements and notes thereto for the year ended January 1, 2012 included in the fiscal 2011 Form 10-K and its Form 8-Ks subsequently filed with the SEC.