Note 14 - Notes Payable


	Years ended August 31,
(In thousands)	2012			2011
Convertible senior notes, due 2018	$	230,000		$	230,000
Convertible senior notes, due 2026		67,724			67,724
Term loans		132,553			137,040
Other notes payable		257			90

		430,534			434,854
Debt discount on convertible senior notes due 2026, net of accretion		(2,455	)		(5,714	)

	$	428,079		$	429,140

Convertible senior notes, due 2018, bear interest at a fixed rate of 3.5%, paid semi-annually in arrears on April 1^st and October 1^st. The convertible notes will mature on April 1, 2018, unless earlier repurchased by Greenbrier or converted in accordance with their terms. The convertible notes are senior unsecured obligations and rank equally with other senior unsecured debt. The convertible notes are convertible into shares of the Company’s common stock, at an initial conversion rate of 26.2838 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $38.05 per share). The initial conversion rate and conversion price are subject to adjustment upon the occurrence of certain events, such as distributions, dividends or stock splits. There were $7.9 million in original debt issuance costs, included in Intangibles and other assets on the Consolidated Balance Sheets, which will be amortized using the effective interest method. The amortization expense is being included in Interest and foreign exchange on the Consolidated Statements of Operations.

Convertible senior notes, due 2026, bear interest at a fixed rate of 2.375%, paid semi-annually in arrears on May 15^th and November 15^th. The Company will also pay contingent interest of 0.375% on the notes in certain circumstances commencing with the six-month period beginning May 15, 2013. On or after May 15, 2013, Greenbrier may redeem all or a portion of the notes at a redemption price equal to 100% of the principal amount of the notes plus accrued and unpaid interest. On May 15, 2013, May 15, 2016 and May 15, 2021 or in the event of certain fundamental changes, holders can require the Company to repurchase all or a portion of their notes at a price equal to 100% of the principal amount of the notes plus accrued and unpaid interest. Payment on the convertible notes is guaranteed by substantially all of the Company’s material domestic subsidiaries. The convertible senior notes are convertible upon the occurrence of specified events into cash and shares, if any, of Greenbrier’s common stock at an initial conversion rate of 20.8125 shares per $1,000 principal amount of the notes (which is equal to an initial conversion price of $48.05 per share). The initial conversion rate is subject to adjustment upon the occurrence of certain events, as defined. The value of the equity component was $14.9 million as of August 31, 2012 and 2011. The debt discount associated with the convertible senior notes is being accreted using the effective interest rate method through May 2013 and the accretion expense is being included in Interest and foreign exchange on the Consolidated Statements of Operations. The pre-tax accretion of the debt discount was $3.2 million, $3.0 million and $3.8 million for the years ended August 31, 2012, 2011 and 2010. The accretion is expected to be approximately $2.5 million for the year ending August 31, 2013.

Term loans are primarily comprised of:

•

A senior term note with an initial balance of $100.0 million, secured by a pool of leased railcars, maturing in March 2014. The note bears a floating interest rate of LIBOR plus 1% with principal of $0.7 million paid quarterly in arrears and a balloon payment of $81.8 million due at maturity. The principal balance as of August 31, 2012 was $85.8 million. An interest rate swap agreement was entered into, on fifty percent of the initial balance, to swap the floating interest rate of LIBOR plus 1% to a fixed rate of 5.24%. At August 31, 2012, the notional amount of the agreement was $42.9 million and matures in March 2014.

•

A senior term note with an initial balance of $50.0 million, secured by a pool of leased railcars, maturing in May 2015. The note bears a floating interest rate of LIBOR plus 1% with principal of $0.3 million paid quarterly in arrears and a balloon payment of $41.2 million due at maturity. The principal balance as of August 31, 2012 was $44.6 million.

•

Other term loans consist of:

•

A term loan with an initial balance of $1.8 million maturing in October 2013. The note bears a floating interest rate of LIBOR plus 2.5% with principal of $0.2 million paid semi-annually in arrears. The balance as of August 31, 2012 was $0.6 million.

•

A term loan with an initial balance of $1.2 million maturing in December 2012. The note bears a floating interest rate of LIBOR plus 4% with a balloon payment due at maturity. The balance as of August 31, 2012 was $1.2 million.

•

A term loan with an initial balance of $0.3 million maturing in November 2015. The note is interest free with principal of $3 thousand paid monthly in arrears and a balloon payment of $0.2 million. The balance as of August 31, 2012 was $0.3 million.

The notes payable, along with the revolving and operating lines of credit, contain certain covenants with respect to the Company and various subsidiaries, the most restrictive of which, among other things, limit the ability to: incur additional indebtedness or guarantees; pay dividends or repurchase stock; enter into sale leaseback transactions; create liens; sell assets; engage in transactions with affiliates, including joint ventures and non U.S. subsidiaries, including but not limited to loans, advances, equity investments and guarantees; enter into mergers, consolidations or sales of substantially all the Company’s assets; and enter into new lines of business. The covenants also require certain maximum ratios of debt to total capitalization and minimum levels of fixed charges (interest and rent) coverage.

Principal payments on the notes payable are expected as follows:


(In thousands)
Year ending August 31,
2013⁽¹⁾	$	73,469
2014		84,710
2015		42,183
2016		172
2017		–
Thereafter		230,000

	$	430,534

⁽¹⁾	The repayment of the $67.7 million of Convertible senior notes due 2026 is assumed to occur in 2013, which is the first date holders can require the Company to repurchase all or a portion of the notes.