Debt

Credit Agreement

As of January 1, 2017, we are a party to a Credit Agreement dated as of January 15, 2016 (as amended on June 29, 2016, the "Credit Agreement") with Morgan Stanley Senior Funding, Inc. (“MSSF”), as administrative agent and collateral agent, the other agents party thereto and the lenders referred to therein (collectively, the “Lenders”). As of January 1, 2017, the Credit Agreement consisted of a term loan A facility and a revolving facility with commitments in an aggregate principal amount of $325.0 million, both maturing on January 15, 2021, and a term loan B facility maturing on January 15, 2023. The term loan A facility requires quarterly principal payments of 1.25% of the amended principal amount for the next five quarters and 2.5% of the amended principal amount for the remaining quarters. The term loan B facility requires quarterly principal payments equal to 0.25% of the original principal amount of the term loan B Facility. We have made sufficient optional principal payments on our term loan B Facility such that there are no scheduled principal payments required until maturity.

The Credit Agreement also requires us to pay a commitment fee for the unused portion of the revolving facility, which will be a minimum of 0.25% and a maximum of 0.35%, depending on the Company’s consolidated net leverage ratio. Interest for Base Rate loans is calculated on the basis of a 365/366-day year and interest for LIBOR-based loans is calculated on the basis of a 360-day year.

All principal amounts outstanding as of January 1, 2017, Eurodollar Rate loans and interest rate information of the Credit Agreement were as follows:



	Principal Outstanding		Base Rate		Base Rate Margin		Eurodollar Rate Margin		Eurodollar Floor		Applicable Rate
Revolving Facility	$	235.2	3.75	%	1.25	%	2.25	%	—	%	2.99	%
Term Loan A Facility	$	788.3	3.75	%	1.25	%	2.25	%	—	%	2.86	%
Term Loan B Facility	$	674.7	3.75	%	2.00	%	3.00	%	0.75	%	3.75	%

The margin for borrowings under the term loan A facility and revolving facility vary depending upon our consolidated net leverage ratio.

As of January 1, 2017, the fair value of principal outstanding on the Credit Agreement was $1.7 billion. We classify this valuation as a Level 2 fair value measurement.

The obligations under the Credit Facilities are collateralized by a lien on substantially all of our personal property and material real property assets, subject in each case to certain customary exceptions.

Debt issuance costs recorded as a reduction to principal outstanding in the condensed consolidated balance sheets were $42.0 million as of January 1, 2017 and $44.0 million as of October 2, 2016.

Our Credit Agreement contains financial covenants including a maximum consolidated net leverage ratio and minimum fixed charge coverage ratio and also contains other customary affirmative and negative covenants and events of default. We were in compliance with our covenants as of January 1, 2017.

Amendment to Credit Agreement

On January 25, 2017, we entered into an Increase Term Joinder No. 2 to our Credit Agreement with respect to an incremental term B loan facility in an aggregate principal amount of $235.0 million under our existing Credit Agreement. In addition, on January 25, 2017, we entered into Amendment No. 2 to our existing Credit Agreement. Amendment No. 2 provides for, among other things (i) new pricing terms for term B loans outstanding under the Credit Agreement, (ii) certain modifications to the restricted payments provisions and (iii) certain modifications to Microsemi’s ability to incur incremental debt. The proceeds of the incremental term B facility were used to repay outstanding balances on the Revolving Facility. In addition, concurrent with the repricing and incremental borrowing, we also made an optional principal payment of $0.2 million on the Revolving Facility.

Immediately following the Amendment No. 2 and Increase Term Joinder No. 2, the principal amounts outstanding, Eurodollar Rate loans and interest rate information under the Credit Agreement, as amended by Amendment No. 2 and Increase Term Joinder No. 2 were as follows:



	Principal Outstanding		Base Rate		Base Rate Margin		Eurodollar Rate Margin		Eurodollar Floor		Applicable Rate
Revolving Facility	$	—	3.75	%	1.25	%	2.25	%	—	%	3.02	%
Term Loan A Facility	$	788.3	3.75	%	1.25	%	2.25	%	—	%	3.02	%
Term Loan B Facility	$	909.7	3.75	%	1.25	%	2.25	%	—	%	3.02	%

Senior Unsecured Notes

On January 15, 2016, we completed the sale of $450.0 million of our 9.125% senior unsecured notes due April 2023 (the “Notes”) to qualified institutional buyers and pursuant to Regulation S in a private offering exempt from the registration requirements of the Securities Act of 1933, as amended. The Notes were issued under an indenture, dated January 15, 2016, among Microsemi, the subsidiaries of Microsemi party thereto as note guarantors, and U.S. Bank National Association, as trustee (the “Indenture”).

As of January 1, 2017, the fair value of principal outstanding on the Notes was $524.3 million. We classify this valuation as a Level 1 fair value measurement.

The Notes accrue cash interest at a rate of 9.125% per year, payable semi-annually on April 15 and October 15 of each year. The Notes mature on April 15, 2023. We may redeem the Notes, and the holders of the Notes may require us to repurchase the Notes, prior to the date of maturity in certain circumstances pursuant to the terms and conditions of the Indenture. The Indenture contains customary affirmative and negative covenants and events of default.