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Notes Payable, Long-Term Debt and Capital Lease Obligations
 12 Months Ended
Aug. 31, 2016
Notes Payable, Long-Term Debt and Capital Lease Obligations [Abstract]  
Notes Payable, Long-Term Debt and Capital Lease Obligations

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

Notes payable, long-term debt and capital lease obligations outstanding at August 31, 2016 and 2015 are
summarized below (in thousands):
August 31,August 31,
20162015
7.750% Senior Notes due 2016(a)$―$309,511
8.250% Senior Notes due 2018(b)398,552397,599
5.625% Senior Notes due 2020(c)396,212395,321
4.700% Senior Notes due 2022(d)496,041495,387
4.900% Senior Notes due 2023(e)298,329―
Borrowings under credit facilities(f)―323
Borrowings under loans(g)502,21030,410
Capital lease obligations(h)28,47828,156
Fair value adjustment related to terminated interest rate swaps on
the 7.750% Senior Notes(i)―2,077
Total notes payable, long-term debt and capital lease obligations2,119,8221,658,784
Less current installments of notes payable, long-term debt and
capital lease obligations45,810322,966
Notes payable, long-term debt and capital lease obligations, less
current installments$2,074,012$1,335,818

The $400.0 million of 8.250% senior unsecured notes, $400.0 million of 5.625% senior unsecured notes, $500.0 million of 4.700% senior unsecured notes and $300.0 million of 4.900% senior unsecured notes outstanding are carried at the principal amount of each note, less any unamortized discount. The estimated fair values of the Company's publicly traded debt, including the 8.250%, 5.625% and 4.700% senior notes, were approximately $437.9 million, $433.3 million and $523.8 million respectively, at August 31, 2016. The fair value estimates are based upon observable market data (Level 2 criteria). The estimated fair value of the Company's private debt, the 4.900% senior notes, was approximately $312.3 million, at August 31, 2016. This fair value estimate is based on the Company's indicative borrowing cost derived from discounted cash flows (Level 3 criteria). The carrying amounts of borrowings under credit facilities and under loans approximates fair value as interest rates on these instruments approximates current market rates.

(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 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. The 7.750% Senior Notes matured on July 15, 2016, and at that time, the outstanding balance was fully paid.

(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) On May 19, 2016, the Company entered into a note purchase agreement with certain third parties which closed on July 14, 2016 for a private placement of $300.0 million of senior unsecured notes maturing on July 14, 2023 with an interest rate of 4.9% (the “4.900% Senior Notes”). The proceeds from the sale of the notes were used to repay the Company’s $312.0 million 7.750% Senior Notes due July 15, 2016. The Company is subject to financial covenants based in part on those set forth in its Revolving Credit Facility, including: (1) a maximum ratio of consolidated indebtedness to consolidated EBITDA and (2) a minimum ratio of (a) consolidated EBITDA to (b) interest payable on, and amortization of debt discount in respect of, all indebtedness and loss on sale of accounts receivable. In addition, the Company and its subsidiaries, are subject to other covenants, such as: limitation upon transactions with affiliates; limitation upon mergers, consolidations, etc.; limitation upon sales of assets; limitation upon changes in line of business; terrorism sanction regulations; limitation upon subsidiary indebtedness; limitation upon liens; financial and business information; visitation rights; compliance with laws; insurance; maintenance of properties; payment of taxes and claims; preservation of corporate existence, etc.; keeping of books and records; subsidiary guarantees or liability for certain indebtedness; and most favored lender requirement with respect to certain indebtedness. Terms used above in the description of financial covenants have specific meanings ascribed to them in the note purchase agreement

(f) As of August 31, 2016, the Company has eleven credit facilities with foreign subsidiaries that finance their future growth and any corresponding working capital needs. Nine of the credit facilities are denominated in U.S. dollars, one is denominated in Brazilian reais and one is denominated in Euros. The credit facilities incur interest at fixed and variable rates ranging from 1.2% to 12.4%.

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. 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 Revolving Credit Facility and Term Loan Facility agreement. Fees include a facility fee based on the revolving credit commitments of the lenders and a letter of credit fee based on the amount of outstanding letters of credit. 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 2016, the Company borrowed $5.8 billion against the Revolving Credit Facility under multiple draws and repaid $5.8 billion under multiple payments.

During the fourth quarter of fiscal year 2016, 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 $150.0 million with interest charged at a rate of LIBOR plus 1.1%.

(g) On September 22, 2015, the Company borrowed $500.0 million against the Term Loan Facility.

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, 2016, the VIE had approximately $18.9 million of total assets, of which approximately $18.6 million was comprised of a note receivable due from the Company, and approximately $18.5 million of total liabilities, of which approximately $18.5 million were debt obligations to the third-party creditors (as the VIE has utilized approximately $18.5 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, 2016, the Company has borrowings outstanding to fund working capital needs. These additional loans total approximately $2.4 million, of which $1.4 million are denominated in Euros, $0.7 million are denominated in Russian rubles and $0.3 million are denominated in U.S. dollars.

(h) Primarily related to various capital lease obligations the company acquired during the fourth quarter of fiscal year 2013, in connection with the acquisition of Nypro.

(i) 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 14 - “Derivative Financial Instruments and Hedging Activities” to the Consolidated Financial Statements.

Under its 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 8.250%, 5.625%, or 4.700% Senior Notes upon a “change of control repurchase event.”

Debt maturities as of August 31, 2016 for the next five years and thereafter are as follows (in thousands):
Fiscal Year Ending August 31,Amount
2017$45,810
2018443,692
201951,484
2020364,096
2021397,930
Thereafter816,810
Total$2,119,822