Note 4. DEBT

Short-term Borrowings and Current Portion of Long-term Debt

Short-term borrowings and current portion of long-term debt at March 25, 2012 and at December 25, 2011 consisted of the following:

(amounts in thousands)	March 25, 2012	December 25, 2011
Overdraft	$ 542	$ 405
Full-recourse factoring liabilities	8,251	8,809
Term loans	10,775	9,125
Other short-term borrowings	1,034	2,529
Current portion of long-term debt	31,101	910
Total short-term borrowings and current portion of long-term debt	$ 51,703	$ 21,778

In February 2012, the Company entered into a $3.2 million Sri Lanka banking facility, which includes a $2.7 million term loan, and a combined $0.5 million sublimit for an overdraft, import line and import cash line. As of March 25, 2012, $2.7 million and $0.1 million were outstanding on the term loan and import cash line, respectively.

In October 2009, the Company entered into a $12.0 million (€8.0 million) full-recourse factoring arrangement. The arrangement is secured by trade receivables. Borrowings bear interest at rates of EURIBOR plus a margin of 3.00%. As of March 25, 2012, the interest rate was 3.8%. As of March 25, 2012, our short-term full-recourse factoring arrangement equaled $8.3 million (€6.2 million) and is included in short-term borrowings in the accompanying Consolidated Balance Sheets.

Long-Term Debt

Long-term debt as of March 25, 2012 and December 25, 2011 consisted of the following:

(amounts in thousands)

	March 25, 2012	December 25, 2011
Senior secured credit facility:
$125 million variable interest rate revolving credit facility maturing in 2014	$ 48,085	$ 52,248
Senior Secured Notes:
$25 million 4.00% fixed interest rate Series A senior secured notes maturing in 2015	25,000	25,000
$25 million 4.38% fixed interest rate Series B senior secured notes maturing in 2016	25,000	25,000
$25 million 4.75% fixed interest rate Series C senior secured notes maturing in 2017	25,000	25,000
Full-recourse factoring liabilities	1,246	1,333
Other capital leases with maturities through 2016	641	1,013
Total	124,972	129,594
Less current portion	31,101	910
Total long-term portion	$ 93,871	$ 128,684

Senior Secured Credit Facility

The Senior Secured Credit Facility includes an expansion option that will allow us, subject to certain conditions, to request an increase in the Senior Secured Credit Facility of up to an aggregate of $50.0 million, for a potential total commitment of $175.0 million. As of March 25, 2012, we were not eligible to elect to request the $50.0 million expansion option due to financial covenant restrictions.

The Senior Secured Credit Facility contains a $25.0 million sublimit for the issuance of letters of credit of which $1.4 million, issued under the Secured Credit Facility, are outstanding as of March 25, 2012. The Senior Secured Credit Facility also contains a $15.0 million sublimit for swingline loans.

All obligations of domestic borrowers under the Senior Secured Credit Facility are irrevocably and unconditionally guaranteed on a joint and several basis by our domestic subsidiaries. The obligations of foreign borrowers under the Senior Secured Credit Facility are irrevocably and unconditionally guaranteed on a joint and several basis by certain of our foreign subsidiaries as well as the domestic guarantors. Collateral under the Senior Secured Credit Facility includes a 100% stock pledge of domestic subsidiaries and a 65% stock pledge of all first-tier foreign subsidiaries, excluding our Japanese sales subsidiary.

Pursuant to the terms of the Senior Secured Credit Facility, we are subject to various requirements, including covenants requiring the maintenance of a maximum total leverage ratio of 2.75 and a minimum fixed charge coverage ratio of 1.25. The Senior Secured Credit Facility also contains customary representations and warranties, affirmative and negative covenants, notice provisions and events of default, including change of control, cross-defaults to other debt, and judgment defaults. Upon a default under the Senior Secured Credit Facility, including the non-payment of principal or interest, our obligations under the Senior Secured Credit Facility may be accelerated and the assets securing such obligations may be sold. Certain wholly-owned subsidiaries with respect to the Company are guarantors of our obligations under the Senior Secured Credit Facility.

Senior Secured Notes

The Senior Secured Notes Agreement provides that for a three-year period ending on July 22, 2013, we may issue, and our lender may, in its sole discretion, purchase, additional fixed-rate senior secured notes and together with the Senior Secured Notes, up to an aggregate amount of $50.0 million. As of March 25, 2012, we were not eligible to elect to request the $50.0 million expansion option due to financial covenant restrictions.

All obligations under the Senior Secured Notes are irrevocably and unconditionally guaranteed on a joint and several basis by our domestic subsidiaries. Collateral under the Senior Secured Notes includes a 100% stock pledge of domestic subsidiaries and a 65% stock pledge of all first-tier foreign subsidiaries, excluding our Japanese sales subsidiary.

The Senior Secured Notes Agreement is subject to covenants that are substantially similar to the covenants in the Senior Secured Credit Facility Agreement, including covenants requiring the maintenance of a maximum total leverage ratio of 2.75 and a minimum fixed charge coverage ratio of 1.25. The Senior Secured Notes Agreement also contains representations and warranties, affirmative and negative covenants, notice provisions and events of default, including change of control, cross-defaults to other debt, and judgment defaults that are substantially similar to those contained in the Senior Secured Credit Facility, and those that are customary for similar private placement transactions. Upon a default under the Senior Secured Notes Agreement, including the non-payment of principal or interest, our obligations under the Senior Secured Notes Agreement may be accelerated and the assets securing such obligations may be sold. Additionally, the Senior Secured Notes have a make-whole provision that requires the discounted value of the remaining payments on the Senior Secured Notes expected through the end term of each of the Senior Secured Notes to be paid in full upon early termination, acceleration, or prepayment. Certain of our wholly-owned subsidiaries are also guarantors of our obligations under the Senior Secured Notes.

Debt Covenant Compliance

As of March 25, 2012, we were in compliance with all of our debt covenants related to our Senior Secured Credit Facility and Senior Secured Notes (debt agreements). We are required to be compliant with a leverage ratio and a fixed charge coverage ratio (as defined in our respective agreements) at quarterly measurement periods. On February 17, 2012, we received an amendment to our debt agreements which increased the required leverage ratio covenant of adjusted EBITDA to total debt from 2.75 to 3.00, 3.35 and 3.25 for the periods ended March 25th, June 24th and September 23, 2012. In addition, the amendment prohibits the Company from consummating any acquisitions from February 17, 2012 through the fiscal quarter ending September 23, 2012. Had we not received this amendment, we would have been in violation of the leverage ratio covenant as of March 25, 2012.

In the absence of a waiver to debt covenants associated with, or further amendment to our debt agreements, we expect to pay down approximately $30.5 million in order to remain compliant with our leverage covenant as of June 24, 2012. We have both the ability and intention to make these payments if required. Our cash balance at March 25, 2012 is $93.3 million. Management has concluded that it is not probable that our leverage covenant will be violated at quarterly measurement periods twelve months from March 25, 2012. Therefore, we have classified $30.5 million of our Senior Secured Credit Facility to current portion of long-term debt on our Consolidated Balance Sheet as of March 25, 2012.

We currently project that we will be in violation of the fixed charge coverage ratio for the fiscal quarter ended June 24, 2012; however, we expect to be compliant with all of our covenants for all periods subsequent to the fiscal quarter ended June 24, 2012. Management is in the process of negotiating with our lenders in order to obtain covenant relief for the period ended June 24, 2012. Such relief may reduce the need to pay down debt in order to comply with our leverage covenant. There can be no assurance, however, that the Company's lenders will agree to such covenant compliance and if the Company is not able to secure such relief, then an Event of Default could arise under the terms of our debt agreements. Such an Event of Default could have a material adverse effect on the Company's financial condition as we would not be able to pay down the full defaulted debt. If an Event of Default occurs, the lenders in the Company's Bank Facility could begin exercising various creditor rights which could threaten the Company's ability to continue to operate its business.

Full-recourse Factoring Arrangements

In December 2009, we entered into new full-recourse factoring arrangements. The arrangements are secured by trade receivables. The Company received a weighted average of 92.4% of the face amount of receivables that it desired to sell and the bank agreed, at its discretion, to buy. As of March 25, 2012 the factoring arrangements had a balance of $1.2 million (€0.9 million), of which $0.4 million (€0.3 million) was included in the current portion of long-term debt and $0.8 million (€0.6 million) was included in long-term borrowings in the accompanying Consolidated Balance Sheets since the receivables are collectable through 2016.