Debt

3 Months Ended

Mar. 31, 2012

Debt

Debt

Note 7                    Debt

The components of debt were as follows:

				Successor Company
	Interest  Rate		Maturity	March 31, 2012			December 31, 2011
Senior Credit Facility	6.0	%	February 2013	$	—		$	35.0
2011 Secured Term Loan	7.0	%	November 2013	—			45.0
2011 Unsecured Term Loan	11.0	%	May 2014	10.0			10.0
2012 Secured Term Loan	8.0	%	March 2015	50.0			—
Senior Secured Notes	9.5	%	February 2017	525.0			525.0
Discount on 2011 Secured Term Loan				—			(1.5		)
Discount on 2011 Unsecured Term Loan				(2.3		)	(2.6		)
Discount on Senior Secured Notes				(12.0		)	(12.5		)
Fair Value of Embedded Derivative				—			5.4
Total Debt				570.7			603.8
Less: Current portion of 2012 Secured Term Loan				0.5			—
Long-term debt				$	570.2		$	603.8

Interest Expense

Interest expense primarily attributable to our outstanding debt was $17.4 and $13.8 for the three months ended March 31, 2012 and 2011, respectively, including the amortization of deferred financing fees and bond discount of $3.1 and $1.1, respectively.  The weighted average interest rates on our borrowings for the three months ended March 31, 2012 and 2011 were 9.1% and 9.5%, respectively.

2012 Secured Credit Facility

On March 30, 2012, the Company entered into a credit and guarantee agreement (the “Credit Agreement”) with Wells Fargo Bank, National Association, as administrative agent; the Guarantors (defined therein), Wells Fargo Principal Lending, LLC as issuing lender, and the lenders thereunder, providing the Company with a $50.0 million secured term loan (“2012 Secured Term Loan”) and an $11.0 million letter of credit facility (“Letter of Credit Facility” and together with the 2012 Secured Term Loan, the “2012 Secured Credit Facility”).  The 2012 Secured Credit Facility matures on March 30, 2015. The 2012 Secured Term Loan has a short-term repayment of $0.125 due quarterly, which is recorded in current portion of long-term debt in our consolidated balance sheets.  The term loans under the 2012 Secured Term Loan bear interest at a variable rate per annum, based upon the Company’s election of a prime rate or LIBOR (subject to a floor of 4.0% and 3.0%, respectively) plus 4.0% in the case of prime rate borrowings and 5.0% in the case of LIBOR borrowings.  The drawn letters of credit under the Letter of Credit Facility bear an interest rate of 6.0% per annum and the Letter of Credit Facility includes a utilization fee of 1.0% per annum, which will accrue on the total undrawn amount of the Letter of Credit Facility.

The 2012 Secured Credit Facility is fully and unconditionally guaranteed on a first priority secured basis, jointly and severally by ourselves and by substantially all of our existing and future wholly-owned direct and indirect domestic subsidiaries.  The obligations and guaranty under the 2012 Secured Credit Facility are secured by a first priority security interest in the same collateral that secures our Senior Secured Notes.  The 2012 Secured Credit Facility and the Senior Secured Notes are secured by the same collateral and rank pari passu with each other under the documentation governing such collateral; however, the 2012 Secured Credit Facility constitutes “Priority Payment Lien Obligations” under such documentation and enjoys priority (“first out”) treatment with respect to post-default dispositions and realizations of collateral thereunder.

The 2012 Secured Credit Facility contains mandatory prepayment provisions in the event of certain events, including certain asset sales (excluding the sale of the LED business).  Subject to an exception for prepayments made from the Company’s Excess Cash Flow (as defined in the Credit Agreement), the Company will be required to pay a prepayment premium of 1.00% of the principal amount prepaid for any optional and mandatory prepayments prior to March 30, 2013.

2011 Credit Facilities

On August 12, 2011, the Company entered into a term loan and guarantee agreement with Luxor Capital Group, as administrative agent; the Guarantors (defined therein); and the lenders thereunder, consisting of funds affiliated with Luxor Capital Group and Point Lobos Capital, who are shareholders of the Company’s common stock, providing the Company with a $45.0 secured term loan (“2011 Secured Term Loan”).  The 2011 Secured Term Loan would have matured in November 2013 and bore interest at the rate of 7.0% per annum.

On March 6, 2012, the Company executed repayment of the 2011 Secured Term Loan, using net proceeds from our Allrecipes.com sale. Our repayment included $45.0 to satisfy the principal debt, along with $5.0 due under the early repayment provisions.

Also on August 12, 2011, the Company entered into an unsecured term loan and guarantee agreement with Luxor Capital Group, as administrative agent; the Guarantors (defined therein) and the lenders thereunder, consisting of funds affiliated with Luxor Capital Group and Point Lobos Capital, who are shareholders of the Company’s common stock, providing the Company with a $10.0 unsecured term loan (“2011 Unsecured Term Loan” and, together with the 2011 Secured Term Loan, “2011 Credit Facilities”).  The 2011 Unsecured Term Loan matures in May 2014 and bears interest at the rate of 11.0% per annum.

In connection with the 2011 Unsecured Term Loan, the Company issued two tranches of warrants.  See Note 10, Common Stock Warrants for further information.

Luxor Capital Group and Point Lobos Capital and their affiliated funds are considered related parties due to their equity interest in the Company.  See Note 12, Related Party Transactions, for further information.

Senior Secured Notes

On February 11, 2010, RD Escrow Corporation, a subsidiary of RDA, entered into an Indenture (“Indenture”) with RDA, RDA Holding Co., and substantially all of our existing wholly-owned direct and indirect domestic subsidiaries (collectively referred to as the “Guarantors”), Wells Fargo Bank, N.A., as Trustee, and Wilmington Trust FSB, as Collateral Agent, pursuant to which we issued the Floating Rate Senior Secured Notes due 2017 (“Senior Secured Notes”) in a private offering under the Securities Act of 1933.  We issued the Senior Secured Notes at 97% of their face value.  Financing fees of $16.0 related to the Senior Secured Notes were deferred and are amortized under the effective interest rate method over the life of the Senior Secured Notes.

In October 2010, RDA Holding Co. and its subsidiaries filed a Registration Statement on Form S-4 with the Securities and Exchange Commission, in connection with our offer to exchange up to $525.0 of our Senior Secured Notes for a like principal amount of Floating Rate Senior Secured Notes due 2017.  Our Form S-4 filing became effective in February 2011.

The Senior Secured Notes mature on February 15, 2017.  The Senior Secured Notes bear interest at a rate per annum equal to LIBOR (as defined, subject to a three month LIBOR floor of 3.0%) plus 6.5%.  The LIBOR component of the interest rate will be reset quarterly and commenced on May 15, 2010.

Senior Credit Facility

On February 19, 2010, the Company entered into a credit agreement with JPMorgan Chase Bank, N.A., as administrative agent; the Guarantors (which include us and are defined therein); J.P. Morgan Securities Inc., Banc of America Securities LLC, Credit Suisse Securities (U.S.A.) LLC and Goldman Sachs Credit Partners L.P., as joint lead arrangers and joint bookrunners; and JPMorgan Chase Bank, N.A., Bank of America, N.A., Credit Suisse AG and Goldman Sachs Credit Partners L.P., as lenders, providing for a three year revolving credit facility (“Senior Credit Facility”) of up to $50.0 with a $25.0 letter of credit sub-facility.  On March 21, 2012, the Company repaid and terminated its Senior Credit Facility, using $35.0 of net proceeds from our Allrecipes.com sale and we cash-collateralized our letters of credit, $11.4 as of March 21, 2012, which had been issued under the Senior Credit Facility and which we intend to reissue under our Letter of Credit Facility.

Letters of Credit

As discussed above, as of March 31, 2012, there was $11.4 in cash-collateralized letters of credit.  There was $11.5 in standby letters of credit as of December 31, 2011, against the $25.0 letter of credit sub-facility of the Senior Credit Facility.  The letters of credit served as security, primarily related to real estate leases entered into by RDA, Direct Holdings, and Allrecipes.com, Inc.; and as security for surety bonds related to sweepstakes promotions and customs duties.

Fair Values

Our fair value measurements based on Level 2 of the fair value hierarchy included the Senior Secured Notes.  Based on quoted prices in markets that are not active, we estimated that the fair value of our $525.0 Senior Secured Notes was approximately $463.3 and $388.5, as of March 31, 2012 and December 31, 2011, respectively.

Our fair value measurements based on Level 3 of the fair value hierarchy included the 2012 Secured Term Loan, Senior Credit Facility, 2011 Secured Term Loan and 2011 Unsecured Term Loan.

We estimated that the fair value of our 2012 Secured Term Loan was $50.0 at March 31, 2012, based on the March 30, 2012 origination date.

We estimated that the fair value of our Senior Credit Facility was approximately $33.0 at December 31, 2011.  There was very limited trading activity on our Senior Credit Facility.

We estimated that the fair value of our 2011 Unsecured Term Loan was $9.0 and $8.8, as of March 31, 2012 and December 31, 2011, respectively.  We estimated that the fair value of our 2011 Secured Term Loan was $40.7 at December 31, 2011. There has been no trading activity on the 2011 Credit Facilities.