Short-Term and Long-Term Debt

12 Months Ended

Oct. 31, 2019

2025 Term Loan

The net carrying values of Ciena’s term loan were comprised of the following for the fiscal periods indicated (in thousands):



	October 31, 2019										October 31, 2018
	Principal Balance		Unamortized Discount			Deferred Debt Issuance Costs			Net Carrying Value		Net Carrying Value
Term Loan Payable due September 28, 2025	$	693,000	$	(1,958	)	$	(3,636	)	$	687,406	$	693,450

Deferred debt issuance costs deducted from the carrying amount of the term loan totaled $3.6 million at October 31, 2019 and $4.3 million at October 31, 2018. Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate method, through the maturity of the term loan. The amortization of deferred debt issuance costs for this term loan is included in interest expense, and was $0.6 million and $0.7 million during fiscal 2019 and fiscal 2018, respectively.

As of October 31, 2019, the estimated fair value of the term loan was $694.7 million. Ciena’s term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its term loan using a market approach based on observable inputs, such as current market transactions involving comparable securities.

On September 28, 2018, Ciena, as borrower, and Ciena Communications, Inc. and Ciena Government Solutions, Inc., as guarantors, entered into an Increase Joinder and Refinancing Amendment to Credit Agreement with the lenders party thereto and the Administrative Agent (the “Refinancing Agreement”), pursuant to which Ciena refinanced its the 2022 Term Loan into the 2025 Term Loan. In connection with the transaction, Ciena received a loan in the amount of $699.1 million, net of original discount, from the 2025 Term Loan and simultaneously repaid $394.0 million of outstanding principal under the 2022 Term Loan, resulting in proceeds of $305.1 million. The 2025 Term Loan requires Ciena to make installment payments of $1.75 million on a quarterly basis. Based on the continuation of existing lenders and the addition of new lenders, this arrangement was primarily accounted for as a modification of debt and, as such, $3.8 million of debt issuance costs associated with the 2025 Term Loan were expensed. The aggregate balance of $2.4 million of debt issuance costs and approximately $1.4 million of original discount from the 2022 Term Loan, $1.9 million of debt issuance costs associated with new lenders for the 2025 Term Loan, and approximately $0.9 million of original discount from the 2025 Term Loan, were included in the carrying value of the 2025 Term Loan.

The Refinancing Agreement amends Ciena’s credit agreement, dated July 15, 2014, as amended (the “Credit Agreement”) and provides that the 2025 Term Loan will, among other things:


•	amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the principal amount of the 2025 Term Loan as of September 28, 2018, with the balance payable at maturity;


•	be subject to mandatory prepayment provisions upon the occurrence of certain specified events substantially similar to the 2022 Term Loan, including certain asset sales, debt issuances and receipt of annual Excess Cash Flow (as defined in the Credit Agreement);


•	bear interest, at Ciena’s election, at a per annum rate equal to (a) LIBOR (subject to a floor of 0.00%) plus an applicable margin of 2.00%, or (b) a base rate (subject to a floor of 1.00%) plus an applicable margin of 1.00%; and

•

be repayable at any time at Ciena’s election, provided that repayment of the 2025 Term Loan with proceeds of certain indebtedness prior to March 28, 2019 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment.