Note 9 - Long-Term Debt

6 Months Ended

Nov. 30, 2012

9. LONG-TERM DEBT

Long-term debt consists of the following (in thousands):

	November 30, 2012			May 31, 2012


Term Loan Facility, net of $13,082 and $16,821 debt discounts, respectively (1)	$	595,780		$	595,104
Revolving Facility		1,000			-
Notes, net of $4,602 and $4,821 debt discounts, respectively		395,398			395,179
		992,178			990,283
Less current portion, net of discounts		(5,108	)		(3,922	)
Long-term debt, net of current portion	$	987,070		$	986,361

(1) $2,733 of the decrease in debt discounts was included in loss on debt extinguishment.

Senior Secured Credit Facilities, Security Agreement and Guaranty

In connection with the Acquisition on August 19, 2011, the Company entered into a credit agreement and related security and other agreements for (1) a $615.0 million senior secured term loan facility with Term B Loans (the “Original Term Loan Facility”) and (2) a $100.0 million senior secured revolving loan facility (the “Revolving Facility,” and together with the Original Term Loan Facility, the “Original Senior Credit Facilities”) with certain lenders, Citibank, N.A., as administrative agent and collateral agent and the other agents party thereto. In addition to borrowings upon prior notice, the Revolving Facility includes borrowing capacity in the form of letters of credit and borrowings on same-day notice, referred to as swingline loans, in each case, up to $25.0 million, and is available in U.S. dollars, GBP, Euros, Yen, Canadian dollars and in such other currencies as the Company and the administrative agent under the Revolving Facility may agree (subject to a sublimit for such non-U.S. currencies).

On August 21, 2012, the Company, the administrative agent and the various lenders party thereto modified the Original Senior Credit Facilities by entering into Amendment No. 1 (the “Amendment”) to the credit agreement. The Amendment replaced the existing Term B Loans with a new class of Term B-1 Loans in an aggregate principal amount of $610.4 million (the “Term Loan Facility”). The Term B-1 Loans mature on August 19, 2018. The Amendment also extended the maturity date of the Revolving Facility to August 19, 2017. The Term Loan Facility together with the Revolving Facility is referred to as the “Senior Credit Facilities.”

As a result of the Amendment, the Company recognized a $6.7 million loss on debt extinguishment with regards to certain portions of the deferred financing costs ($4.0 million) and original issuance discount (“OID”) ($2.7 million) related to the Original Term Loan Facility. The Amendment had no significant impact related to the Revolving Facility, as there was no change in the lenders or decrease in the Revolving Facility borrowing capacity. In addition, the Company capitalized $2.5 million of debt issuance costs associated with the Amendment as Deferred Financing Costs.

The credit agreement, as amended, governing the Senior Credit Facilities provides that, subject to certain conditions, the Company may request additional tranches of term loans and/or increase commitments under the Revolving Facility and/or the Term Loan Facility and/or add one or more incremental revolving credit facility tranches (provided there are no more than three such tranches with different maturity dates outstanding at any time) in an aggregate amount not to exceed (a) $150.0 million plus (b) an unlimited amount at any time, subject to compliance on a pro forma basis with a senior secured first lien net leverage ratio of no greater than 4.00 to 1.00. Availability of such additional tranches of term loans or revolving credit facilities and/or increased commitments is subject to, among other conditions, the absence of any default under the credit agreement governing the Senior Credit Facilities and the receipt of commitments by existing or additional financial institutions.

The Company is required to make scheduled principal payments on the last business day of each calendar quarter equal to 0.25% of the amended principal amount of loans under the Term Loan Facility, or $1.5 million, with the balance due and payable on August 19, 2018. The Company is also required to repay loans under the Term Loan Facility based on annual excess cash flows as defined in the credit agreement governing the Term Loan Facility and upon the occurrence of certain other events set forth in the Term Loan Facility.

Borrowings under the Senior Credit Facilities bear interest at a rate per annum equal to an applicable margin plus, at the Company’s option, either (a) in the case of borrowings in U.S. dollars, a base rate determined by reference to the highest of (1) the prime rate of Citibank, N.A., (2) the federal funds effective rate plus 0.50% and (3) a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for an interest period of one month adjusted for certain additional costs, plus 1.00% or (b) in the case of borrowings in U.S. dollars or another currency, a LIBOR rate determined by reference to the costs of funds for U.S. dollar deposits for the interest period relevant to such borrowing adjusted for certain additional costs, which, in the case of the Term Loan Facility only, shall be no less than 1.25%. The applicable margin for borrowings under the Term Loan Facility is 3.50% with respect to base rate borrowings and 4.50% with respect to LIBOR borrowings. The applicable margin for borrowings under the Revolving Facility is currently 3.50% with respect to base rate borrowings and 4.50% with respect to LIBOR borrowings. The applicable margin for borrowings under the Revolving Facility is subject to a 0.25% step-down, when the Company’s senior secured net leverage ratio at the end of a fiscal quarter is less than or equal to 3:00 to 1:00. The interest rate on the term loan was 5.75% as of November 30, 2012. At November 30, 2012, there was $1.0 million of borrowings under the Revolving Facility at an average interest rate of 6.75% and no outstanding letters of credit.

Prior to the Amendment, the interest rate on the Original Term Loan Facility had a LIBOR floor of 1.50% and the applicable margin was 5.75%. The Revolving Facility’s interest rates had an applicable margin of 4.75% with respect to base rate loans and 5.75% with respect to LIBOR loans. The interest rate on the Original Term Loan Facility for all periods prior to the effective date of the Amendment was 7.25%.

All obligations under the Senior Credit Facilities are unconditionally guaranteed by the Parent and certain of the Company’s existing and future wholly owned domestic subsidiaries (such subsidiaries collectively, the “Subsidiary Guarantors”), and are secured, subject to certain exceptions, by substantially all of the Company’s assets and the assets of the Parent and Subsidiary Guarantors, including, in each case subject to customary exceptions and exclusions:

•

a first-priority pledge of all of the Company’s capital stock directly held by Parent and a first-priority pledge of all of the capital stock directly held by the Company and Subsidiary Guarantors (which pledge, in the case of the capital stock of each (a) domestic subsidiary that is directly owned by the Company or by any Subsidiary Guarantor and that is a disregarded entity for United States federal income tax purposes and that has no material assets other than equity interests in one or more foreign subsidiaries that are controlled foreign corporations for United States federal income tax purposes or (b) foreign subsidiary, is limited to 65% of the stock of such subsidiary); and

•

a first-priority security interest in substantially all of the Parent’s, the Company’s and the Subsidiary Guarantor’s other tangible and intangible assets. Parent has no material operations or assets other than the capital stock of the Company.

The Senior Credit Facilities include restrictions on the Company’s ability and the ability of certain of its subsidiaries to, among other things, incur or guarantee additional indebtedness, pay dividends (including to Parent) on, or redeem or repurchase capital stock, make certain acquisitions or investments, materially change its business, incur or permit to exist certain liens, enter into transactions with affiliates or sell its assets to, or merge or consolidate with or into, another company or prepay or amend subordinated or unsecured debt.

Although the Parent is not generally subject to the negative covenants under the Senior Credit Facilities, the Parent is subject to a passive holding company covenant that limits its ability to engage in certain activities other than (i) owning equity interests in the Company and holding cash or property received by the Company, (ii) maintaining its legal existence and engaging in administrative matters related to being a holding company, (iii) performing its obligations under the Senior Credit Facilities, the Senior Notes due 2019 (“Notes”) and other financings not prohibited by the Senior Credit Facilities, (iv) engaging in public offerings of its securities and other equity issuances and financing activities permitted under the Senior Credit Facilities, (v) providing indemnifications to officers and directors and (vi) engaging in activities incidental to the activities described above.

In addition, the credit agreement as amended governing the Senior Credit Facilities requires the Company to comply with a maximum senior secured net leverage ratio financial maintenance covenant of 5.25 to 1.00, to be tested on the last day of each fiscal quarter. A breach of this covenant is subject to certain equity cure rights. The credit agreement governing the Senior Credit Facilities also contains certain customary representations and warranties, affirmative covenants and provisions relating to events of default, including upon change of control and a cross-default to any other indebtedness with an aggregate principal amount of $20 million or more. If an event of default occurs under the Senior Credit Facilities, the lenders may declare all amounts outstanding under the Senior Credit Facilities immediately due and payable. In such event, the lenders may exercise any rights and remedies they may have by law or agreement, including the ability to cause all or any part of the collateral securing the Senior Credit Facilities to be sold.

Indenture and the Senior Notes Due 2019

On August 19, 2011, the Company (as successor by merger to IVD Acquisition Corporation, the Merger Sub), issued $400 million in principal amount of Notes. The Notes bear interest at a rate of 11.125% per annum, and interest is payable semi-annually on February 15 and August 15 of each year. The Notes mature on August 15, 2019.

Subject to certain exceptions, the Notes are guaranteed on a senior unsecured basis by each of the Company’s current and future wholly owned domestic restricted subsidiaries (and non-wholly owned subsidiaries if such non-wholly owned subsidiaries guarantee the Company’s or another guarantor’s other capital market debt securities) that is a guarantor of certain debt of the Company or another guarantor, including the Senior Credit Facilities. The Notes are the Company’s senior unsecured obligations and rank equally in right of payment with all of the Company’s existing and future indebtedness that is not expressly subordinated in right of payment thereto. The Notes will be senior in right of payment to any future indebtedness that is expressly subordinated in right of payment thereto and effectively junior to (a) the Company’s existing and future secured indebtedness, including the Senior Credit Facilities described above, to the extent of the value of the collateral securing such indebtedness and (b) all existing and future liabilities of the Company’s non-guarantor subsidiaries.

The Indenture governing the Notes contains certain customary provisions relating to events of default and covenants, including without limitation, a cross-payment default provision and cross-acceleration provision in the case of a payment default or acceleration according to the terms of any indebtedness with an aggregate principal amount of $25 million or more, restrictions on the Company’s and certain of its subsidiaries’ ability to, among other things, incur or guarantee indebtedness; pay dividends on, redeem or repurchase capital stock; prepay, redeem or repurchase certain debt; sell or otherwise dispose of assets; make investments; issue certain disqualified or preferred equity; create liens; enter into transactions with the Company’s affiliates; designate the Company’s subsidiaries as unrestricted subsidiaries; enter into agreements restricting the Company’s restricted subsidiaries’ ability to (1) pay dividends, (2) make loans to the Company or any restricted subsidiary that is a guarantor or (3) sell, lease or transfer assets to the Company or any restricted subsidiary that is a guarantor; and consolidate, merge, or transfer all or substantially all of the Company’s assets. The covenants are subject to a number of exceptions and qualifications. Certain of these covenants, excluding without limitation those relating to transactions with the Company’s affiliates and consolidation, merger, or transfer of all or substantially all of the Company’s assets, will be suspended during any period of time that (1) the Notes have investment grade ratings and (2) no default has occurred and is continuing under the Indenture. In the event that the Notes are downgraded to below an investment grade rating, the Company and certain subsidiaries will again be subject to the suspended covenants with respect to future events.

The Company is not aware of any violations of the covenants pursuant to the terms of the Indenture or the credit agreement, as amended, governing the Senior Credit Facilities.

Future Commitments

Debt principal repayment requirements over the next five fiscal years are as follows (in thousands):

Year Ending May 31:
2013	$	4,052
2014		6,104
2015		6,104
2016		6,104
2017		6,104
Thereafter		981,394
	$	1,009,862

Interest Expense

The significant components of interest expense are as follows (in thousands):

	Quarter Ended November 30, 2012		Quarter Ended November 30, 2011


Notes, including OID amortization	$	11,236	$	11,358
Term loan facility, including OID amortization		9,325		11,791
Amortization of deferred financing costs		1,166		1,198
Interest rate swaps		257		220
Revolving credit facility interest and fees		265		203
Other interest		2		80
Interest expense	$	22,251	$	24,850

			Successor		Predecessor
	Six Months Ended November 30, 2012		August 20, 2011 Through November 30, 2011		June 1, 2011 Through August 19, 2011


Notes, including OID amortization	$	22,469	$	12,971	$	-
Term loan facility, including OID amortization		20,900		13,462		-
Amortization of deferred financing costs		2,389		1,335		-
Interest rate swaps		525		220		-
Revolving credit facility fees		452		175		-
Other interest		4		80		-
Interest expense	$	46,739	$	28,243	$	-