Note 9 - Debt and Revolving Lines of Credit
 3 Months Ended
Nov. 30, 2012
Debt Disclosure [Text Block]
Note 9 — Debt and Revolving Lines of Credit

Our debt (including capital lease obligations) consisted of the following (in thousands):

 
 
November 30, 2012
   
August 31, 2012
 
 
 
Short-term
   
Long-term
   
Short-term
   
Long-term
 
0%-3.7% interest vendor financing contracts, 2.3%-3.7% imputed interest, due December 2012-December 2013
  $ 6,253     $ 5,010     $ 6,586     $ 4,982  
Debt of consolidated joint venture: 6% interest, due January 2013
    3,450       —       3,400       —  
Capital lease obligations
    437       179       430       289  
Subtotal
  $ 10,140     $ 5,189     $ 10,416     $ 5,271  
Westinghouse Bonds (see description below)
    1,570,976       —       1,640,497       —  
Total
  $ 1,581,116     $ 5,189     $ 1,650,913     $ 5,271  

Westinghouse Bonds

On October 13, 2006, NEH, our wholly owned, special purpose subsidiary, issued JPY 128.98 billion (equivalent to approximately $1.1 billion at the time of issuance) principal amount limited recourse bonds, maturing March 15, 2013, at a discount receiving approximately $1.0 billion in proceeds, excluding offering costs. NEH used the proceeds of these bonds to purchase the Westinghouse Equity for approximately $1.1 billion. The Westinghouse Bonds are limited recourse to us (except to NEH), are governed by the Bond Trust Deed and are collateralized primarily by the Westinghouse Equity, the JPY-denominated Put Options between NEH and Toshiba and the Principal LC and Interest LC, which cover interest owed to bond holders and the 3.3% principal exposure.

The holders of the Westinghouse Bond had the ability to cause us to put our Westinghouse Equity back to Toshiba as a result of the occurrence of a “Toshiba Event” (as defined under the Bond Trust Deed) that occurred in May 2009. A Toshiba Event is not an event of default or other violation of the Bond Trust Deed or the Put Option Agreements, but due to the Toshiba Event, the Westinghouse Bond holders had an opportunity to direct us to exercise the Put Options, through which we would have received the pre-determined JPY-denominated put price whose proceeds must be used to pay off the JPY-denominated Westinghouse Bond debt. To do so, a “supermajority” of the Westinghouse bond holders representing a majority of not less than an aggregate 75% of the principal amount outstanding must have passed a resolution instructing the bond trustee to direct us to exercise the Put Options.

Because the holders of the bonds had the ability to require us to exercise the Put Options to retire the bonds, we reclassified the Westinghouse Bonds from long-term debt to short-term debt and our Investment in Westinghouse to current assets in May 2009.

The Put Options, executed as part of the Investment in Westinghouse transaction, provide NEH the option to sell all or part of the Westinghouse Equity to Toshiba for a pre-determined JPY-denominated put price. On October 6, 2012, NEH exercised its Put Options to sell the Westinghouse Equity to Toshiba. Under the terms of the put option agreements, the Put Options will be cash settled on or before January 4, 2013 with the proceeds deposited in trust to fund retirement of the Westinghouse Bonds on March 15, 2013.

The Put Options require Toshiba to purchase the Westinghouse Equity at a price equivalent to not less than 96.7 percent of the principal amount of the bonds for JPY 124.7 billion, which was approximately $1,519.1 million at November 30, 2012. NEH will fund the 3.3 percent shortfall of the principal amount of the bonds of JPY 4.3 billion, which was approximately $51.9 million at November 30, 2012. We may recognize a non-operating gain once the Put Options are settled, resulting principally from foreign exchange movements. If the bonds would have been repaid at November 30, 2012, from an early exercise of the Put Options, the gain would have been approximately $430.1 million pre-tax. The actual gain or loss will be determined at settlement.

Because any proceeds from the repurchase of the Westinghouse Equity (including funds received in connection with settlement of the Put Options) must be used to repay the Westinghouse Bonds, ultimate settlement of the Westinghouse Bonds may be significantly influenced by Toshiba’s financial condition as well as conditions in the general credit markets.

The exchange rates of the JPY to the USD at November 30, 2012, and August 31, 2012 were 82.1 and 78.6.

The Westinghouse Bonds consisted of the following (in thousands):

 
 
 
November 30,
2012
   
August 31,
2012
 
Westinghouse Bonds, face value 50.98 billion JPY due March 15, 2013; interest only payments; coupon rate of 2.20%;
  $ 426,875     $ 426,875  
Westinghouse Bonds, face value 78 billion JPY due March 15, 2013; interest only payments; coupon rate of 0.70% above the six-month JPY LIBOR rate (0.30% at November 30, 2012)
    653,125       653,125  
Increase in debt due to foreign currency transaction adjustments since date of issuance
    490,976       560,497  
Total Westinghouse debt
  $ 1,570,976     $ 1,640,497  

On October 16, 2006, we entered into an interest rate swap agreement through March 15, 2013, in the aggregate notional amount of JPY 78 billion. We designated the swap as a hedge against changes in cash flows attributable to changes in the benchmark interest rate. Under the agreement, we make fixed interest payments at a rate of 2.398%, and we receive a variable interest payment equal to the six-month JPY London Interbank Offered Rate (LIBOR) plus a fixed margin of 0.70%, effectively fixing our interest rate on the floating rate portion of the JPY 78 billion Westinghouse Bonds at 2.398%. At November 30, 2012 and August 31, 2012, the fair value of the swap totaled approximately $6.4 million and $13.4 million, respectively, and is included as a current liability and in accumulated other comprehensive loss, net of deferred taxes, in the accompanying consolidated balance sheets. There was no material ineffectiveness of our interest rate swap for the three months ended November 30, 2012.

Credit Facility

On June 15, 2011, we entered into an unsecured second amended and restated credit agreement (Facility) with a group of lenders that effectively terminated an earlier agreement. The Facility provides lender commitments up to $1,450.0 million, all of which may be available for the issuance of performance letters of credit. The Facility has a sublimit of $1,250.0 million that may be available for the issuance of financial letters of credit and / or borrowings for working capital needs and general corporate purposes.

At November 30, 2012 the amount of the Facility available for financial letters of credit and/or revolving credit loans was $888.5 million, which is equal to the lesser of: (i)  $1,218.0 million, representing the total Facility commitment ($1,450.0 million) less outstanding performance letters of credit ($150.8 million) less outstanding financial letters of credit ($81.2 million); (ii) $1,168.8 million, representing the Facility sublimit of $1,250.0 million less outstanding financial letters of credit ($81.2 million); or (iii)  $888.5 million, representing the maximum additional borrowings allowed under the leverage ratio covenant (as defined below) contained in the Facility.

Under the Facility, all collateral securing the previous agreement was released and the expiration of commitments was extended through June 15, 2016. The Facility continues to require guarantees by the Company’s material wholly-owned domestic subsidiaries. The Facility allows the Company to seek new or increased lender commitments under it subject to the consent of the Administrative Agent and/or seek other unsecured supplemental credit facilities of up to an aggregate of $500.0 million, all of which would be available for the issuance of performance and financial letters of credit and/or borrowings for working capital needs and general corporate purposes. Additionally, the Company may pledge up to $300.0 million of its unrestricted cash on hand to secure additional letters of credit incremental to amounts available under the Facility, provided that the Company and its subsidiaries have unrestricted cash and cash equivalents of at least $500.0 million available immediately following the pledge. The Facility contains a revised pricing schedule with respect to letter of credit fees and interest rates payable by the Company.

The Facility contains customary financial covenants and other restrictions including an interest coverage ratio (ratio of Shaw EBITDA to consolidated interest expense) and a leverage ratio (ratio of total debt to Shaw EBITDA) with all terms defined in the Facility, and (i) maintains or resets maximum allowable amounts certain threshold triggers and certain additional exceptions with respect to the dividend, stock repurchases, investment, indebtedness, lien, asset sale, letter of credit and acquisitions and (ii) additional covenants, thus providing the Company with continued financial flexibility in business decisions and strategies. The Facility contains defaulting lender provisions.

The Facility limits our ability to declare or pay dividends or make any distributions of capital stock (other than stock splits or dividends payable in our own capital stock) or redeem, repurchase or otherwise acquire or retire any of our capital stock. The Facility permits us to make stock repurchases or dividend payments of up to $500.0 million so long as, after giving effect to such purchases or payments, our unrestricted cash and cash equivalents is at least $500.0 million. We are limited to aggregate dividend payments and/or stock repurchases during the life of the Facility up to $500.0 million. In situations where our unrestricted cash and cash equivalents is less than $500.0 million, our ability to pay dividends or repurchase our shares is limited to $50.0 million per fiscal year. The payment of cash dividends is restricted if an event of default has occurred and is continuing under the Facility. The Facility also contains certain restrictions regarding share repurchases. While we continue to have an open authorization from our Board to repurchase up to $326.1 million in shares, subject to Facility limitations, the Transaction Agreement contains covenants that further restrict our ability to repurchase shares.

The total amount of fees associated with letters of credit issued under the Facility were approximately $1.8 million and $2.0 million for the three months ended November 30, 2012 and 2011, respectively, which includes commitment fees associated with unused credit line availability of approximately $0.9 million and $0.9 million, respectively.

For the three months ended November 30, 2012 and 2011, we recognized $0.6 million and $0.6 million, respectively, of interest expense associated with the amortization of financing fees related to our Facility. At November 30, 2012 and August 31, 2012, unamortized deferred financing fees related to our Facility were approximately $8.7 million and $9.4 million, respectively.

At November 30, 2012, we were in compliance with the financial covenants contained in the Facility.

Other Revolving Lines of Credit

Shaw-Nass, a consolidated VIE located in Bahrain, has an available credit facility (Bahrain Facility) with a total capacity of 3.0 million Bahraini Dinars (BHD) or approximately $8.0 million, of which BHD 1.5 million is available for bank guarantees and letters of credit. At November 30, 2012, Shaw-Nass had no borrowings under its revolving line of credit and approximately $0.7 million in outstanding bank guarantees under the Bahrain facility. The interest rate applicable to any borrowings is a variable rate (1.25% at November 30, 2012) plus 3.00% per annum. We have provided a 50% guarantee related to the Bahrain facility.

We have uncommitted, unsecured standby letter of credit facilities with banks outside of our Facility. Fees under these facilities are paid quarterly. At November 30, 2012 and August 31, 2012, there were $82.5 million of letters of credit outstanding under these facilities.