Note 9: Long-Term Debt and Other Borrowing Arrangements

The carrying values of our long-term debt and other borrowing arrangements were as follows:


	September 30, 2012			December 31, 2011
	(In thousands)

Senior subordinated notes:
5.5% Senior subordinated notes due 2022	$	700,000		$	—
9.25% Senior subordinated notes due 2019		17,132			200,926
7.0% Senior subordinated notes due 2017		—			350,000

Total senior subordinated notes		717,132			550,926

Senior secured credit faciliy:
Term Loan		255,400			—
Revolving credit agreement		—			—

Total senior secured credit facility		255,400			—

Total debt and other borrowing arrangements		972,532			550,926
Less current maturities of Term Loan		(12,770	)		—

Long-term debt	$	959,762		$	550,926

Senior Secured Facility

In July 2012, we amended our senior secured credit facility (Senior Secured Facility) and borrowed a CAD$250 million term loan (the Term Loan) in order to fund a portion of the purchase price for the acquisition of Miranda (see Note 2). The Term Loan matures in 2017 and requires quarterly amortization payments beginning in the fourth fiscal quarter of 2012. Interest on the Term Loan is variable, based upon the three-month Canadian money-market rate plus an applicable spread. We paid $1.7 million of fees associated with the Term Loan, which are being amortized over the life of the Term Loan using the effective interest method.

The borrowing capacity under the revolving credit agreement of our Senior Secured Facility is $400.0 million, and it matures on April 25, 2016. Under the revolving credit agreement, we are permitted to borrow and re-pay funds in various currencies. Interest on outstanding borrowings is variable, based on either the three month LIBOR rate or the prime rate. As of September 30, 2012, there were no outstanding borrowings under the revolving credit agreement, and we had $386.8 million in available borrowing capacity, as our borrowing capacity is reduced by outstanding credit instruments.

In 2011, we paid $3.3 million of fees associated with the revolving credit agreement, which are being amortized over the life of the revolving credit agreement using the effective interest method.

Borrowings under our Senior Secured Facility are secured by certain of our assets in the United States as well as the capital stock of certain of our subsidiaries. The Senior Secured Facility contains a leverage ratio covenant and a fixed charge coverage ratio covenant. As of September 30, 2012, we were in compliance with all of the covenants of the Senior Secured Facility.

Senior Subordinated Notes

In January 2012, we repurchased $0.6 million of our senior subordinated notes due 2017 at par. The indentures governing our senior subordinated notes required that to the extent proceeds from qualifying dispositions of assets in the business were not reinvested in the business, we were required to offer to repurchase our notes at par. We made such an offer as a result of excess proceeds from our disposition of Trapeze Networks, Inc. in 2010.

In August 2012, we issued $700.0 million aggregate principal amount of 5.5% senior subordinated notes due 2022. The notes are guaranteed on a senior subordinated basis by certain of our subsidiaries. The notes rank equal in right of payment with our senior subordinated notes due 2017 and 2019 and with any future subordinated debt, and they are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Senior Secured Facility. Interest is payable semiannually on March 1 and September 1 of each year, beginning March 1, 2013. We paid $13.4 million of fees associated with the issuance of the notes, which are being amortized over the life of the notes using the effective interest method. We used the net proceeds from the transaction to fund the repurchase of certain of our senior subordinated notes due 2017 and 2019, as discussed below, and for general corporate purposes.

In our fiscal third quarter of 2012, we completed a tender offer and repurchased $291.9 million principal amount of our senior subordinated notes due 2017 for cash consideration of $303.0 million and repurchased $183.0 million principal amount of our senior subordinated notes due 2019 for cash consideration of $212.7 million. We recorded a loss on extinguishment of debt of $47.8 million related to the tender offer, including the write-off of unamortized debt issuance costs related to these instruments.

Subsequent to the completion of the tender offer, we repurchased the remaining $57.5 million of our senior subordinated notes due 2017 for cash consideration of $59.5 million pursuant to a notice of redemption. We recorded a loss on extinguishment of debt of $2.7 million related to the repurchase, including the write-off of unamortized debt issuance costs related to these instruments.

As of September 30, 2012, $17.0 million aggregate principal amount of our senior subordinated notes due 2019 remain outstanding. The senior subordinated notes due 2019 have a carrying value of $17.1 million, a coupon interest rate of 9.25%, and an effective interest rate of 9.75%. The interest on the 2019 notes is payable semiannually on June 15 and December 15. The notes are guaranteed on a senior subordinated basis by certain of our subsidiaries. The notes rank equal in right of payment with any future senior subordinated debt, and are subordinated to all of our senior debt and the senior debt of our subsidiary guarantors, including our Senior Secured Facility.

Fair Value of Long-Term Debt

The fair value of our senior subordinated notes at September 30, 2012 was approximately $740.4 million based on quoted prices of the debt instruments in inactive markets (Level 2 valuation). This amount represents the fair values of our senior subordinated notes with a carrying value of $717.1 million. We believe the fair value of our Term Loan approximates book value.