LONG-TERM DEBT

6 Months Ended

Jun. 30, 2011

LONG-TERM DEBT

LONG-TERM DEBT.

12.LONG-TERM DEBT

Long-term debt consisted of the following:

	June 30,			December 31,
	2011			2010
2.0% convertible senior subordinated notes due June 1, 2015	$	819,990		$	820,000
Debt discount on 2.0% convertible senior subordinated notes due June 1, 2015	(153,600		)	(170,183		)
2.5% convertible senior subordinated notes due May 1, 2014	500,000			500,000
Debt discount on 2.5% convertible senior subordinated notes due May 1, 2014	(97,011		)	(111,357		)
Other	8,708			4,953
Total debt	$	1,078,087		$	1,043,413
Less current portion	(672,102		)	(651,997		)
Total long-term debt	$	405,985		$	391,416

At June 30, 2011, we have included $3.6 million of short-term debt related to Alba, a variable interest entity for which we are the primary beneficiary.  Alba’s liabilities represent contractual obligations of Alba for general corporate purposes. Alba’s creditors have no recourse to the general credit of Cephalon.

Convertible Notes

The liability component of our convertible notes will be classified as current liabilities and presented in current portion of long-term debt and the equity component of our convertible debt will be considered a redeemable security and presented as redeemable equity on our consolidated balance sheet if our debt is considered current at the balance sheet date. At June 30, 2011 and December 31, 2010, our stock price was $79.90 and $61.72, respectively, and therefore, the 2.0% Notes are considered to be current liabilities based on conversion price and are presented in current portion of long-term debt on our consolidated balance sheet.

As of June 30, 2011, not all closing conditions to the merger agreement have been met and, therefore, we consider the 2.5% Notes to be long-term liabilities, based on conversion price.

Commencing upon the closing of the merger, holders of the convertible notes will have the option to require us to purchase for cash all or any part of the convertible notes, in accordance with the terms of the convertible notes, at a purchase price equal to 100% of the principal amount of the notes, plus accrued and unpaid interest, payable in cash.  Additionally, in connection with the merger, the convertible notes will be convertible pursuant to their terms, at the option of the holder, into the right to receive an amount in cash and shares of common stock (which share consideration will be settled following consummation of the merger through the receipt of the applicable cash merger consideration) determined pursuant to the terms of the applicable indenture. In addition, as a result of the merger, (i) the conversion rate of the 2.5% Notes (currently 14.4928 shares per $1,000 principal amount) will be increased during the applicable conversion period specified in the indenture by a “make whole” premium, calculated in accordance with the indenture governing the 2.5% Notes, and (ii) a “make whole” premium will be determined for the 2.0% Notes in accordance with the terms of the applicable indenture as a percentage of their principal amount (resulting in an effective increase in the conversion rate of the 2.0% Notes (currently 21.4133 shares per $1,000 principal amount)).

In August 2008, we established a $200 million, three-year revolving credit facility with JP Morgan Chase Bank, N.A. and certain other lenders.  The credit facility is available for letters of credit, working capital and general corporate purposes and is guaranteed by certain of our domestic subsidiaries.  The credit agreement contains customary covenants, including but not limited to covenants related to total debt to Consolidated EBITDA (as defined in the credit agreement), senior debt to Consolidated EBITDA, interest expense coverage and limitations on capital expenditures, asset sales, mergers and acquisitions, indebtedness, liens, and transactions with affiliates.  As of the date of this filing, we have not drawn any amounts under the credit facility and we do not intend to renew or extend the existing credit facility or enter into a new credit facility.

In the event that a significant conversion of our convertible debt did occur, we believe that we have the ability to fund the payment of principal amounts due through a combination of utilizing our existing cash on hand, accessing our credit facility, raising money in the capital markets or selling our note hedge instruments for cash.