Debt and Credit Facilities

3 Months Ended

Apr. 02, 2016

Debt Disclosure [Abstract]

Debt and Credit Facilities

Debt and Credit Facilities

As of April 2, 2016, the Company had a $2.1 billion unsecured syndicated revolving credit facility, which includes a $450 million letter of credit sub-limit, (the “2014 Motorola Solutions Credit Agreement”) scheduled to mature on May 29, 2019. The Company must comply with certain customary covenants, including maximum leverage ratio as defined in the 2014 Motorola Solutions Credit Agreement. The Company was in compliance with its financial covenants as of April 2, 2016. The Company did not borrow or issue any letters of credit under the 2014 Motorola Solutions Credit Agreement during the three months ended April 2, 2016.

On August 25, 2015, the Company entered into an agreement with Silver Lake Partners to issue $1.0 billion of 2% Senior Convertible Notes which mature in September 2020. Interest on these notes is payable semiannually. The notes are convertible anytime on or after two years from their issuance date, except in certain limited circumstances. The notes are convertible based on a conversion rate of 14.5985 per $1,000 principal amount (which is equal to an initial conversion price of $68.50 per share). In the event of conversion, the Company intends to settle the principal amount of the Senior Convertible Notes in cash.

The Company has recorded a debt liability associated with the Senior Convertible Notes by determining the fair value of an equivalent debt instrument without a conversion option. Using a discount rate of 2.4%, which was determined based on a review of relevant market data, the Company has calculated the debt liability to be $992 million, indicating an $8 million discount to be amortized over the expected life of the debt instrument. The total of proceeds received in excess of the fair value of the debt liability of $8 million has been recorded within Additional paid-in capital.

In connection with the completion of the acquisition of GDCL, the Company entered into a new term loan credit agreement (the “Term Loan Agreement”), under which the Company borrowed a Term Loan with an initial principal amount of $675 million and a maturity date of February 18, 2019. Interest on the Term Loan is variable and indexed to LIBOR. The interest expense on the Term Loan is payable semi-annually in May and November. No additional borrowings are permitted under the Term Loan Agreement and amounts borrowed and repaid or prepaid may not be re-borrowed. The Company's borrowing capacity under the 2014 Motorola Solutions Credit Agreement may be partially limited during the second quarter of 2016 due to the additional indebtedness incurred in connection with the Term Loan.

Effective January 1, 2016, the Company retrospectively adopted ASU No. 2015-03, "Interest-Imputation of Interest (Subtopic 835-30): Simplifying the Presentation of Debt Issuance Costs." Under this guidance, we have revised the presentation of debt issuance costs which were previously capitalized in other assets in the consolidated balance sheet to be presented as a reduction to long-term debt. As of April 2, 2016 and December 31, 2015, $40 million and $41 million, respectively, have been reclassified to be presented as a component of long-term debt.