Debt



	January 31, 2012		October 31, 2011
(in millions)
Manufacturing operations
8.25% Senior Notes, due 2021, net of unamortized discount of $29 and $33 at the respective dates	$	871	$	967
3.0% Senior Subordinated Convertible Notes, due 2014, net of unamortized discount of $68 and $73 at the respective dates	502		497
Debt of majority-owned dealerships	92		94
Financing arrangements and capital lease obligations	160		118
Loan Agreement related to 6.5% Tax Exempt Bonds, due 2040	225		225
Promissory Note	38		40
Asset-Based Credit Facility	100		—
Other	42		39
Total manufacturing operations debt	2,030		1,980
Less: Current portion	200		99
Net long-term manufacturing operations debt	$	1,830	$	1,881
Financial services operations
Asset-backed debt issued by consolidated SPEs, at variable rates, due serially through 2018	$	1,371	$	1,664
Bank revolvers, at fixed and variable rates, due dates from 2013 through 2017	997		1,072
Commercial paper, at variable rates, due serially through 2012	63		70
Borrowings secured by operating and finance leases, at various rates, due serially through 2017	72		70
Total financial services operations debt	2,503		2,876
Less: Current portion	897		1,280
Net long-term financial services operations debt	$	1,606	$	1,596

Manufacturing Operations

Our 8.25% Senior Notes, due in 2021 (the "Senior Notes") contain an optional redemption feature allowing the Company not more than once during each twelve-month period ending on November 1, 2010, 2011, 2012, 2013, and 2014, to redeem up to $50 million in principal amount of the Senior Notes, at a redemption price equal to 103% of the principal amount of the notes redeemed, plus accrued and unpaid interest, if any. The Company exercised this early redemption feature for a total principal amount of $100 million, by redeeming $50 million of Senior Notes on November 1, 2011 and an additional $50 million of Senior Notes on November 2, 2011. During the three months ending January 31, 2012, the Company recorded $8 million of charges, relating to the early redemption premium and write-off of related discount and debt issuance costs.

In October 2011, Navistar, Inc. and various other U.S. subsidiaries signed a definitive loan agreement relating to a five-year inventory secured, asset-based revolving senior line of credit facility in an aggregate principal amount of $355 million (the "Asset-Based Credit Facility"). In November 2011, we borrowed $100 million under the Asset-Based Credit Facility.

In January 2012, the Company began leasing an existing manufacturing facility in Cherokee, Alabama and purchased certain machinery and equipment within that facility. In relation to the machinery and equipment, the Company entered into a $40 million promissory note with the lessor. This amount is payable in monthly installments over a ten-year term, in conjunction with the lease of the facility. The Company recorded the machinery and equipment, and the associated liability, at the relative fair value of $58 million. Accordingly, this arrangement is included within our financing arrangements and capital lease obligations.

Financial Services Operations

In December 2011, NFC refinanced its bank credit facility dated December 2009, as amended, with a five-year $840 million facility consisting of a$340 million term loan and a $500 million revolving line of credit. The new facility is subject to customary operational and financial covenants. Quarterly principal payments on the term portion will be $4 million for the first eight quarters and $9 million for the next eleven quarters, with the balance due at maturity.