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Notes Payable, Long-Term Debt and Capital Lease Obligations
 12 Months Ended
Aug. 31, 2015
Notes Payable, Long-Term Debt and Capital Lease Obligations [Abstract]  
Notes Payable, Long-Term Debt and Capital Lease Obligations

8. Notes Payable, Long-Term Debt and Capital Lease Obligations

Notes payable, long-term debt and capital lease obligations outstanding at August 31, 2015 and August 31, 2014 are
summarized below (in thousands):
August 31,August 31,
20152014
7.750% Senior Notes due 2016(a)$310,378$308,659
8.250% Senior Notes due 2018(b)399,047398,665
5.625% Senior Notes due 2020(c)400,000400,000
4.700% Senior Notes due 2022(d)500,000500,000
Borrowings under credit facilities(e)3231,685
Borrowings under loans(f)30,41038,207
Capital lease obligations(g)28,15630,879
Fair value adjustment related to terminated interest rate swaps on
the 7.750% Senior Notes(h)2,0774,450
Total notes payable, long-term debt and capital lease obligations1,670,3911,682,545
Less current installments of notes payable, long-term debt and
capital lease obligations323,83312,960
Notes payable, long-term debt and capital lease obligations, less
current installments$1,346,558$1,669,585

The $312.0 million of 7.750% senior unsecured notes, $400.0 million of 8.250% senior unsecured notes, $400.0 million of 5.625% senior unsecured notes and $500.0 million of 4.700% senior unsecured notes outstanding are carried at the principal amount of each note, less any unamortized discount. The estimated fair values of these senior notes were approximately $328.7 million, $450.1 million, $418.8 million and $495.6 million, respectively, at August 31, 2015. The fair value estimates are based upon observable market data (Level 2 criteria).

(a) During the fourth quarter of fiscal year 2009, the Company issued $312.0 million of seven-year, publicly-registered 7.750% notes (the “7.750% Senior Notes”) at 96.1% of par, resulting in net proceeds of approximately $300.0 million. The 7.750% Senior Notes mature on July 15, 2016 and pay interest semiannually on January 15 and July 15. Also, the 7.750% Senior Notes are the Company’s senior unsecured obligations and rank equally with all other existing and future senior unsecured debt obligations.

(b) During the second and third quarters of fiscal year 2008, the Company issued $250.0 million and $150.0 million, respectively, of ten-year, unregistered 8.250% notes at 99.965% of par and 97.5% of par, respectively, resulting in net proceeds of approximately $245.7 million and $148.5 million, respectively. On July 18, 2008, the Company completed an exchange whereby all of the outstanding unregistered 8.250% notes were exchanged for registered 8.250% notes (collectively the “8.250% Senior Notes”) that are substantially identical to the unregistered notes except that the 8.250% Senior Notes are registered under the Securities Act and do not have any transfer restrictions, registration rights or rights to additional special interest.

The 8.250% Senior Notes mature on March 15, 2018 and pay interest semiannually on March 15 and September 15. The interest rate payable on the 8.250% Senior Notes is subject to adjustment from time to time if the credit ratings assigned to the 8.250% Senior Notes increase or decrease, as provided in the 8.250% Senior Notes. The 8.250% Senior Notes are the Company’s senior unsecured obligations and rank equally with all other existing and future senior unsecured debt obligations.

(c) During the first quarter of fiscal year 2011, the Company issued $400.0 million of ten-year publicly registered 5.625% notes (the “5.625% Senior Notes”) at par. The net proceeds from the offering of $400.0 million were used to fully repay the term portion of the credit facility dated as of July 19, 2007 (the “Old Credit Facility”) and partially repay amounts outstanding under the Company’s foreign asset-backed securitization program. The 5.625% Senior Notes mature on December 15, 2020. Interest on the 5.625% Senior Notes is payable semiannually on June 15 and December 15 of each year, beginning on June 15, 2011. The 5.625% Senior Notes are the Company’s senior unsecured obligations and rank equally with all other existing and future senior unsecured debt obligations.

(d) During the fourth quarter of fiscal year 2012, the Company issued $500.0 million of ten-year publicly registered 4.700% notes (the “4.700% Senior Notes”) at 99.992% of par. The net proceeds from the offering of $500.0 million were used to repay outstanding borrowings under the Credit Facility and for general corporate purposes. The 4.700% Senior Notes mature on September 15, 2022 and pay interest semiannually on March 15 and September 15 of each year, beginning on March 15, 2013. The 4.700% Senior Notes are the Company’s senior unsecured obligations and rank equally with all other existing and future senior unsecured debt obligations.

(e) As of August 31, 2015, nine of the Company’s foreign subsidiaries have credit facilities that finance their future growth and any corresponding working capital needs. Five of the credit facilities are denominated in U.S. dollars, one is denominated in Brazilian reais, one is denominated in Euros, one is denominated in Russian rubles and one is denominated in Taiwan new dollar. The credit facilities incur interest at fixed and variable rates ranging from 0.8% to 28.0%.

On July 6, 2015, the Company entered into an amended and restated senior unsecured five year credit agreement. The credit agreement provides for the Revolving Credit Facility in the initial amount of $1.5 billion, which may, subject to the lenders’ discretion, potentially be increased up to $2.0 billion and a $500.0 million five year delayed draw Term Loan Facility. The Term Loan Facility may be drawn in whole or in part (but on no more than two occasions) until September 30, 2015. Both the Revolving Credit Facility and the Term Loan Facility expire on July 6, 2020, but in the case of the Revolving Credit Facility, subject to two whole or partial one-year extensions, at the lender’s discretion. Interest and fees on Revolving Credit Facility and Term Loan Facility advances are based on the Company’s non-credit enhanced long-term senior unsecured debt rating as determined by Standard & Poor’s Ratings Service, Moody’s Investors Service and Fitch Ratings. Interest is charged at a rate equal to (a) for the Revolving Credit Facility, either 0.000% to 0.650% above the base rate or 1.000% to 1.650% above the Eurocurrency rate and (b) for the Term Loan Facility, either 0.125% to 1.000% above the base rate or 1.125% to 2.000% above the Eurocurrency rate, in each case where the base rate represents the greatest of Citibank, N.A.’s base rate, 0.50% above the federal funds rate, and 1.0% above one-month LIBOR, but not less than zero, and the Eurocurrency rate represents adjusted LIBOR or adjusted CDOR, as applicable, for the applicable interest period, but not less than zero, each as more fully described in the Credit Facility agreement. Fees include a facility fee based on the revolving credit commitments of the lenders, a letter of credit fee based on the amount of outstanding letters of credit and a ticking fee based on the undrawn term loan commitments until the earlier of September 30, 2015 and the date of the second term loan draw. The Company, along with its subsidiaries, is subject to the following financial covenants: (1) a maximum Debt to EBITDA Ratio (as defined in the Credit Facility agreement) and (2) a minimum ratio of (a) Consolidated EBITDA to (b) interest payable on, and amortization of debt discount in respect of, all Debt (as defined in the Credit Facility agreement) and loss on sale of accounts receivable. In addition, the Company is subject to other covenants, such as: limitation upon liens; limitation upon mergers, etc.; limitation upon accounting changes; limitation upon subsidiary debt; limitation upon sales, etc. of assets; limitation upon changes in nature of business; payment restrictions affecting subsidiaries; limitation upon use of proceeds; compliance with laws, etc.; payment of taxes, etc.; maintenance of insurance; preservation of corporate existence, etc.; visitation rights; keeping of books; maintenance of properties, etc.; transactions with affiliates; and reporting requirements.

During fiscal year 2015, the Company borrowed $5.7 billion against the Revolving Credit Facility under multiple draws and repaid $5.7 billion under multiple payments. On September 22, 2015, the Company borrowed $500.0 million against the Term Loan Facility.

During the second quarter of fiscal year 2014, a foreign subsidiary of the Company entered into an uncommitted credit facility to finance its growth and any corresponding working capital needs. The credit facility provides for a revolving credit facility in the amount of up to $100.0 million with interest charged at a rate of LIBOR plus 1.7%.

(f) During the third quarter of fiscal year 2012, the Company entered into a master lease agreement with a variable interest entity (the “VIE”) whereby it sells to and subsequently leases back from the VIE up to $60.0 million in certain machinery and equipment for a period of up to five years. In connection with this transaction, the Company holds a variable interest in the VIE, which was designed to hold debt obligations payable to third-party creditors. The proceeds from such debt obligations are utilized to finance the purchase of the machinery and equipment that is then leased by the Company. The Company is the primary beneficiary of the VIE as it has both the power to direct the activities of the VIE that most significantly impact the VIE’s economic performance and the obligation to absorb losses or the right to receive benefits that could potentially be significant to the VIE. Therefore, the Company consolidates the financial statements of the VIE and eliminates all intercompany transactions. At August 31, 2015, the VIE had approximately $28.5 million of total assets, of which approximately $28.0 million was comprised of a note receivable due from the Company, and approximately $27.8 million of total liabilities, of which approximately $27.8 million were debt obligations to the third-party creditors (as the VIE has utilized approximately $27.8 million of the $60.0 million debt obligation capacity). The third-party creditors have recourse to the Company’s general credit only in the event that the Company defaults on its obligations under the terms of the master lease agreement. In addition, the assets held by the VIE can be used only to settle the obligations of the VIE.

In addition to the loans described above, at August 31, 2015, the Company has borrowings outstanding to fund working capital needs. These additional loans total approximately $2.6 million, of which $1.8 million are denominated in Euros, $0.5 million are denominated in Russian rubles and $0.3 million are denominated in U.S. dollars.

(g) During the fourth quarter of fiscal year 2013, the Company acquired various capital lease obligations in connection with the acquisition of Nypro.

(h) This amount represents the fair value hedge accounting adjustment related to the 7.750% Senior Notes. For further discussion of the Company’s fair value hedges, see Note 13 - “Derivative Financial Instruments and Hedging Activities” to the Consolidated Financial Statements.

Under its 7.750%, 8.250%, 5.625% and 4.700% Senior Notes, the Company is subject to covenants such as limitations on its and/or its subsidiaries’ ability to: consolidate or merge with, or convey, transfer or lease all or substantially all of the Company’s assets to, another person; create certain liens; enter into sale and leaseback transactions; create, incur, issue, assume or guarantee funded debt (which only applies to the Company’s “restricted subsidiaries”); and guarantee any of the Company’s indebtedness (which only applies to the Company’s subsidiaries). The Company is also subject to a covenant requiring our repurchase of the 7.750%, 8.250%, 5.625% or 4.700% Senior Notes upon a “change of control repurchase event.”

Debt maturities as of August 31, 2015 for the next five years and thereafter are as follows (in thousands):
Fiscal Year Ending August 31,Amount
2016$321,756
201720,049
2018400,329
20191,367
20201,468
Thereafter923,345
Total(1)$1,668,314
(1) The above table excludes a $2.1 million fair value adjustment related to the interest rate swap on the 7.750% Senior Notes.