DEBT

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

Short-term borrowings and current portion of long-term debt at June 24, 2012 and at December 25, 2011 consisted of the following:



(amounts in thousands)	June 24, 2012		December 25, 2011
Overdraft	$	462	$	405
Full-recourse factoring liabilities	7,175		8,809
Term loans	2,558		9,125
Other short-term borrowings	1,088		2,529
Current portion of long-term debt	534		910
Total short-term borrowings and current portion of long-term debt	$	11,817	$	21,778

In June 2012, $8.0 million (HKD 61.8 million) was paid in order to extinguish our existing Hong Kong term loan. The term loan was included in short-term borrowings in the accompanying Consolidated Balance Sheets.

In June 2012, $0.7 million (INR 37.2 million) was paid in order to extinguish an overdraft facility and other short-term loans assumed in connection with the acquisition of the Shore to Shore businesses. The loans were included in short-term borrowings in the accompanying Consolidated Balance Sheets.

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 June 24, 2012, $2.6 million and $0.3 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 June 24, 2012, the interest rate was 3.8%. As of June 24, 2012, our short-term full-recourse factoring arrangement equaled $7.2 million (€5.7 million) and is included in short-term borrowings in the accompanying Consolidated Balance Sheets.

Long-Term Debt

Long-term debt as of June 24, 2012 and December 25, 2011 consisted of the following:



(amounts in thousands)	June 24, 2012		December 25, 2011
Senior secured credit facility:
$125 million variable interest rate revolving credit facility maturing in 2014	$	49,636	$	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	1,063		1,333
Other capital leases with maturities through 2016	573		1,013
Total	126,272		129,594
Less current portion	534		910
Total long-term portion	$	125,738	$	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 June 24, 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 Senior Secured Credit Facility, are outstanding as of June 24, 2012. The Senior Secured Credit Facility also contains a $25.0 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 of our wholly-owned subsidiaries with respect to the Company are guarantors of our obligations under the Senior Secured Credit Facility. Refer to the section below for discussion of debt covenant compliance and amendments to 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 June 24, 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. Refer to the section below for discussion of debt covenant compliance and amendments to the Senior Secured Notes.

Debt Covenant Compliance; Amendments to Debt Agreements

On February 17, 2012, we received amendments to our Senior Secured Credit Facility and Senior Secured Notes ("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 25, June 24 and September 23, 2012. In addition, the amendments prohibit the Company from consummating any acquisitions from February 17, 2012 through the fiscal quarter ending September 23, 2012. Had we not received these amendments, we would have been in violation of the leverage ratio covenant as of March 25, 2012.

Our covenant calculations as of June 24, 2012 were in excess of the amended leverage ratio and original fixed charge coverage ratio covenants related to our Debt Agreements.

On July 31, 2012, we received additional amendments to our Debt Agreements, which contain several modifications. The amendments reduce the total commitment of the Senior Secured Credit Facility to $75.0 million. The amendments increase the required leverage ratio covenant of adjusted EBITDA to total debt to 5.25, 6.50, 5.50, 3.50, and 2.75 for the periods ended June 24, 2012, September 23, 2012, December 30, 2012, March 31, 2013, and June 30, 2013 and thereafter. Cash restructuring of $25.0 million is excluded from the calculation of EBITDA beginning in the fiscal quarter ending June 24, 2012. The amendments waive the fixed charge covenant from June 24, 2012 through September 23, 2012 (the "Waiver Period"), decreases it to 1.00 for the period ended December 30, 2012, and returns to 1.25 for periods thereafter. The actual leverage ratio as of June 24, 2012 is 4.09. In addition, the amendments permit divestitures, acquisitions and transfers of assets to non-credit parties, under certain conditions. The amendments also contain a provision whereby if our cash balance exceeds $65 million as of weekly measurement dates, we must prepay any additional borrowings made subsequent to the amendments. This provision is effective until we are in compliance with our original covenant requirements.

Absent the waiver and additional July 2012 amendment, we would have been in violation of the June 24, 2012 leverage ratio and fixed charge coverage covenants. Although we cannot provide full assurance, we project to be in compliance with all of our covenants for all periods subsequent to the fiscal quarter ended June 24, 2012.

During the Waiver Period, the interest rate spread on the Senior Secured Credit Facility will increase to a maximum of 4.25% over the Base Rate or 5.25% over the LIBOR rate. The “Base Rate” is the highest of (a) our lender’s prime rate, (b) the Federal Funds rate, plus 0.50%, and (c) a daily rate equal to the one-month LIBOR rate, plus 1.00%. The unused line fee will increase to a maximum of 1.00% per annum. The maximum is based in accordance with changes in our leverage ratio.

During the Waiver Period, and until such time the financial covenants return to the original covenants for two consecutive quarters, the coupon rate on the Senior Secured Notes will increase to 5.75%, 6.13%, and 6.50% for the Series A Senior Secured Notes, Series B Senior Secured Notes, and Series C Senior Secured Notes, respectively.

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 June 24, 2012 the factoring arrangements had a balance of $1.1 million (€0.8 million), of which $0.3 million (€0.3 million) was included in the current portion of long-term debt and $0.7 million (€0.6 million) was included in long-term borrowings in the accompanying Consolidated Balance Sheets since the receivables are collectible through 2016.