Note 6. Long-Term Debt and Other Financial Instruments

6 Months Ended

Jun. 30, 2013

Long Term Debt Financial Instruments And Derivatives [Abstract]

Long Term Debt Financial Instruments And Derivatives [Text Block]

6. Long-term debt at June 30, 2013, and December 31, 2012, was as follows:

(In thousands)	June 30, 2013			Dec. 31, 2012
Term loan:
Face value	$	301,537		$	301,537
Remaining original issue discount		(29,891	)		(32,058	)
Remaining warrant discount		(11,201	)		(12,013	)
Carrying value		260,445			257,466
Revolving credit facility ($45 million remaining availability)		-			-
Senior notes:
Face value		299,800			299,800
Remaining original issue discount		(3,594	)		(4,091	)
Carrying value		296,206			295,709
Capital lease liability		4			12
Total carrying value	$	556,655		$	553,187

As of June 30, 2013, and December 31, 2012, the Company had in place a term loan with a face value of $302 million and a revolving credit facility with no outstanding balance and maximum availability of $45 million. Also outstanding were 11.75% senior secured notes with a face value of $300 million that were issued at a price equal to 97.69% of face value. The term loan with Berkshire Hathaway matures in May 2020 and bears an interest rate of 10.5%, but could decrease to 9% based on the Company’s leverage ratio, as defined in the agreement. The Company was in compliance with the provisions of both agreements at June 30, 2013.

In May 2012, the Company consummated a financing arrangement with BH Finance LLC, an affiliate of Berkshire Hathaway, that provided the Company with a $400 million term loan and a $45 million revolving credit facility. The Company subsequently repaid approximately $98 million of principal on the term loan. The term loan was issued at a discount of 11.5% and was secured pari passu with the Company’s existing 11.75% senior secured notes due 2017. While the financing arrangement does not contain financial covenants, there are restrictions, in whole or in part, on certain activities including the incurrence of additional debt, repurchase of shares and the payment of dividends. The term loan may be repaid voluntarily prior to maturity, in whole or in part, at a price equal to 100% of the principal amount repaid plus accrued and unpaid interest, plus a premium, which starts at 14.5% and steps down over time beginning in May 2016, as set forth in the agreement. Other factors, such as the sale of assets, may result in a mandatory prepayment or an offer to prepay a portion of the term loan without premium or penalty. The Company considers the prepayment feature to be an embedded derivative which it bifurcates from the term loan when the fair value is determinable. The term loan and revolving credit facility will mature in May 2020 and are guaranteed by the Company’s subsidiaries. The revolving credit facility bears interest at a rate of 10% and is subject to a 2% fee on the unused portion of the commitment. The Company also issued common stock warrants to purchase 4.6 million shares of common stock to Berkshire Hathaway in conjunction with the financing, the warrants were exercised subsequently.

In conjunction with the secured financing with Berkshire Hathaway and the use of the proceeds of that financing to repay the previous bank credit facility in the second quarter of 2012, the Company recorded debt modification and extinguishment costs of $7.7 million, primarily due to the write-off of unamortized fees related to the previous credit facility.  In addition, the Company capitalized $11.5 million of advisory and legal fees related to the Berkshire Hathaway financing; these fees are amortized as interest expense over the term of the financing arrangement.  Previously, in March 2012, the Company amended its bank credit agreement which resulted in a $10.4 million of expense for debt modification and extinguishment costs including certain advisory, arrangement, and legal fees related to that refinancing. 

The previous bank credit facility had an interest rate of LIBOR (with a 1.5% floor) plus a margin of 7% and commitment fees of 2.5%. In addition to this cash interest, the Company accrued payment-in-kind (PIK) interest of 1.5%. This PIK interest, which totaled approximately $1 million, was treated as additional bank term loan principal and was paid in cash upon repayment of the entire facility.

The following table includes information about the carrying values and estimated fair values of the Company’s financial instruments at June 30, 2013, and December 31, 2012:

	June 30, 2013				December 31, 2012
(In thousands)	Carrying Amount		Fair Value		Carrying Amount		Fair Value
Assets:
Investments
Trading	$	194	$	194	$	198	$	198
Liabilities:
Long-term debt:
Revolving credit facility ($45 million available)		-		-		-		-
Term loan		260,445		335,302		257,466		343,746
11.75% senior notes		296,206		331,093		295,709		346,269

Trading securities held by the Supplemental 401(k) Plan are carried at fair value and are determined by reference to quoted market prices. The fair value of the term loan was determined using a discounted cash flow analysis and an estimate of the current borrowing rate. The fair value of the 11.75% senior notes was valued by reference to the most recent trade prior to the end of the applicable period. Under the fair value hierarchy, the Company’s trading securities fall under Level 1 (quoted prices in active markets), its senior notes fall under Level 2 (other observable inputs) and its term loan falls under Level 3 (unobservable inputs).