Long-Term Debt

Senior Secured Credit Facility

On July 2, 2009, the Company replaced its previous credit agreement by entering into a Credit Agreement (the “Credit Agreement”), with a syndicate of banks that provided for a senior secured credit facility (the “Credit Facility”) of a three and one-quarter year $270,000 revolver (the “Revolver”) which initially accrued interest at a rate of LIBOR plus 2.50%. The interest rate for the Revolver may increase or decrease according to a consolidated interest coverage ratio pricing matrix as defined in the Credit Agreement, plus an applicable percentage. As of April 7, 2010, the Company increased the Revolver to $290,000.

First Amendment. On August 24, 2009, the Company closed the First Amendment to the Credit Agreement which included allowing the issuance of up to an additional $100,000 of Senior Notes due 2016 within 90 days of the First Amendment Effective Date, amending the definition of Consolidated Total Senior Debt to exclude the Existing Senior Notes 2005, amending the definition of Applicable Percentage to clarify the effective date of the change in the Applicable Percentage and modifications to several schedules within the Credit Agreement.

Second Amendment. On June 9, 2010, the Company closed the Second Amendment to the Credit Agreement, which included adding back the Foreign Corrupt Practices Act estimate of $19,450 to Consolidated Net Income for the period ended March 31, 2010 and increasing the Maximum Consolidated Leverage Ratio to 5.25 to 1.00 for the period ending September 30, 2010 and to 5.00 to 1.00 for the period ending March 31, 2011. The Second Amendment also allowed a subsidiary of the Company to incur indebtedness of up to $25,000 after ceasing to be a wholly owned subsidiary, a guarantee by the Company of that indebtedness, the issuance of up to 30% equity interests in the subsidiary to officers, employees, directors, advisory boards and/or its third parties investors and allow certain restricted payments by the subsidiary.

Third Amendment. On June 6, 2011, the Company closed the Third Amendment to the Credit Agreement whereby the lenders agreed to extend the term of the facility to March 31, 2013. In addition, the Third Amendment modified certain financial covenants under the Credit Agreement, including establishing the financial maximum consolidated leverage ratio for each fiscal quarter through maturity, reducing the minimum consolidated interest coverage ratio for the quarter ended March 31, 2011 and the first three quarters of the fiscal year ending March 31, 2012, permitting the exclusion of the effect of specified levels of restructuring and impairment charges for the fiscal year ended March 31, 2011 and the fiscal year ending March 31, 2012 for the financial covenants impacted by the Company’s EBIT, and excluding the effect of noncash deferred compensation expense up to $2,200 for the quarter ended March 31, 2011 for these same covenants. The Third Amendment also increased the basket for capital expenditures for the year ending March 31, 2012 by $15,000 and permitted the Company to form a subsidiary for a specified business purpose to be funded by up to $1,000 in equity and $30,000 in subordinated note investments by the Company, provided the subsidiary receives either revolving credit financing of up to $200,000 from third parties or issues subordinated notes for an aggregate not to exceed $100,000. The Third Amendment increased the interest rates on base rate and LIBOR loans by 1.0 percentage point and the commitment fee on unborrowed amounts under the facility by 0.25 of a percentage point. In addition, pursuant to the Third Amendment, the Company agreed to grant the lenders a security interest on certain U.S. real estate.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 8 - Long-Term Debt (continued)

Senior Secured Credit Facility (continued)

Fourth Amendment. On November 3, 2011, the Company closed the Fourth Amendment to the Credit Agreement that expires March 31, 2013. The amendment permitted the exclusion of specified levels of restructuring and impairment charges from the financial covenants impacted by the Company’s EBIT for fiscal quarters ending on or prior to March 31, 2012 and permitted the exclusion of specified levels of costs and expenses associated with the commercialization, sale or dissolution of the Company’s Alert business from the financial covenants impacted by the Company’s EBIT for fiscal quarters ending on or prior to December 31, 2011. The amendment also extended to April 30, 2012 the period in which the Company is permitted to form one or more subsidiaries for a specified business purpose to be funded by up to $1,000 in equity and $30,000 in subordinated note investments by the Company, provided the subsidiary or subsidiaries receive revolving credit financing of up to $200,000 from third parties and issue subordinated notes for an aggregate of up to $100,000.

Fifth Amendment. Effective June 13, 2012, the Company closed the Fifth Amendment to the Credit Agreement. See Note 21 "Subsequent Event" to the "Notes to Consolidated Financial Statements" for further information.

Financial Covenants. Certain financial covenants and required financial ratios adjust over time in accordance with schedules in the Credit Agreement. After giving effect to the Third Amendment to the Credit Agreement, the requirements of those covenants and financial ratios at March 31, 2012 are as follows:


•	a minimum consolidated interest coverage ratio of not less than 1.90 to 1.00 (1.65 for the quarters ending June and September 30, 2011 and 1.80 for the quarter ending December 31, 2011);


•	a maximum consolidated leverage ratio in an amount not more than a ratio specified for each fiscal quarter as set forth in a schedule, which ratio is 5.50 for the quarter ended March 31, 2012 (6.70 for the quarter ending June 30, 2011, 7.50 for the quarter ending September 30, 2011 and 6.10 for the quarter ending December 31, 2011);


•	a maximum consolidated total senior debt to working capital amount ratio of not more than 0.80 to 1.00; and


•	maximum annual capital expenditures of $55,000 during fiscal year ending March 31, 2012 and $40,000 during any fiscal year thereafter, in each case with a one-year carry-forward for capital expenditures in any fiscal year below the maximum amount.

The Company continuously monitors its compliance with the covenants. At March 31, 2012 and during the fiscal year, the Company was in compliance with the covenants (as revised by the Third Amendment). For the third quarter ended December 31, 2011, had the Company not received a waiver which waived the testing of the maximum consolidated leverage covenant for the period October 1, 2011 through and including December 31, 2011, the Company would not have been in compliance for that period end. Significant changes in market conditions could adversely affect the Company's business. As a result, there can be no assurance that the Company will be able to maintain compliance with its financial covenants in the future. The Company records all fees and third-party costs associated with the Credit Agreement, including amendments thereto, in accordance with accounting guidance for changes in line of credit or revolving debt arrangements.

Senior Notes

On July 2, 2009, the Company issued $570,000 of 10% Senior Notes due 2016 (the “Senior Notes”) at a price of 95.177% of the face value. On August 26, 2009, the Company issued an additional $100,000 tranche of 10% Senior Notes due 2016 at a price of 97.500% of the face value. These additional notes form part of the same series as the Senior Notes issued on July 2, 2009. The Senior Notes are required to be guaranteed by any “material domestic subsidiaries” of the Company as defined in the indenture governing the Senior Notes. The Company does not have a “material domestic subsidiary” at March 31, 2012.

During fiscal 2011, the Company purchased $35,000 of these notes on the open market. All purchased securities were cancelled leaving $635,000 of the 10% senior notes outstanding at March 31, 2011. Associated cash premiums and other costs paid were $1,613. Deferred financing costs and amortization of original issue discount of $2,040 were accelerated.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 8 - Long-Term Debt (continued)

Senior Notes (continued)

Convertible Senior Subordinated Notes

On July 2, 2009, the Company issued $100,000 of 5 ½% Convertible Senior Subordinated Notes due 2014 (the “Convertible Notes”). The initial purchasers of the Convertible Notes were granted an option to purchase up to an additional $15,000 of Convertible Notes solely to cover over-allotments which was exercised on July 15, 2009. Holders may surrender their Convertible Notes, in integral multiples of $1,000 principal amount, for conversion into shares of the Company’s common stock at the then-applicable conversion rate until the close of business on the second scheduled trading day immediately preceding the maturity date. The initial conversion rate for the Convertible Notes is 198.8862 shares of common stock per $1,000 principal amount of Convertible Notes. The conversion rate is subject to adjustments based on certain events as described in the indenture governing the Convertible Notes. In addition, holders of these notes have certain rights and entitlements upon the occurrence of certain fundamental changes (as defined in the indenture governing the Convertible Notes).

Other Senior Notes and Senior Subordinated Notes

The Company applied a portion of the net proceeds from the issuance of the Senior Notes and Convertible Notes to fund the purchase of $120,365 of its previously existing 8 1/2% Senior Notes due 2012 and the purchase, defeasance and redemption of all of its previously existing 11% Senior Notes due 2012, 12 ¾% Senior Subordinated Notes due 2012, 9 5/8% Senior Notes due 2011, 7 3/4% Senior Notes due 2013 and 8% Senior Notes due 2012, Series B pursuant to an early settlement of a cash tender offer.

As a result of the repurchase, defeasance and redemption of the notes that existed prior to the refinancing, the Company accelerated approximately $5,591 of deferred financing costs and $5,563 of amortization of original issue discount during the year ended March 31, 2010.

During fiscal 2011, the Company purchased $23,635 of the remaining 8 1/2% Senior Notes due 2012 on the open market. All purchased securities were cancelled leaving $6,000 of the 8 ½% senior notes outstanding at March 31, 2011. Associated cash premiums and other costs paid were $650. Deferred financing costs and amortization of original issue discount of $282 were accelerated.

Convertible Note Hedge and Warrant Transactions

In connection with the offering of the Convertible Notes, the Company entered into privately negotiated convertible note hedge transactions with three counterparties (“hedge counterparties”) to cover, subject to customary anti-dilution adjustments, the number of shares of the Company’s common stock that initially underlie the Convertible Notes and expire on the last day that any Convertible Notes remain outstanding. The Company also entered separately into privately negotiated warrant transactions relating to the same number of shares of the Company’s common stock with the hedge counterparties. The convertible note hedge transactions are expected to reduce the potential dilution with respect to the common stock of the Company upon conversion of the Convertible Notes in the event that the value per share of common stock, as measured under the convertible note hedge transactions, during the applicable valuation period, is greater than the strike price of the convertible note hedge transactions, which corresponds to the $5.0280 per share initial conversion price of the Convertible Notes and is similarly subject to customary anti-dilution adjustments. If, however, the price per share of the Company’s common stock, as measured under the warrants, exceeds the strike price of the warrant transactions during the applicable valuation period, there would be dilution from the issuance of common stock pursuant to the warrants. The warrants have a strike price of $7.3325 per share, which is subject to customary anti-dilution adjustments and the maximum number of shares that could be issued under the warrant transactions is 45,743,836. The warrants expire in daily installments commencing on October 15, 2014 and ending on April 8, 2015. Both the convertible note hedge transactions and the warrant transactions require physical net-share settlement and are accounted for as equity instruments.

Foreign Seasonal Lines of Credit

The Company has typically financed its non-U.S. operations with uncommitted unsecured short-term seasonal lines of credit at the local level. These operating lines are seasonal in nature, normally extending for a term of 180 to 270 days corresponding to the tobacco crop cycle in that location. These facilities are typically uncommitted in that the lenders have the right to cease making loans and demand repayment of loans at any time. These loans are typically renewed at the outset of each tobacco season. As of March 31, 2012, the Company had approximately $374,532 drawn and outstanding on foreign seasonal lines with maximum capacity totaling $655,154 subject to limitations as provided for in the Credit Agreement. Additionally, against these lines there was $13,981 available in unused letter of credit capacity with $7,239 issued but unfunded.

ITEM 8. FINANCIAL STATEMENTS AND SUPPLEMENTARY DATA (continued)

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (continued)

Alliance One International, Inc. and Subsidiaries

(in thousands)

Note 8 - Long-Term Debt (continued)

Long-Term Foreign Seasonal Borrowings

As of March 31, 2012, the Company had foreign seasonal borrowings with maturity greater than one year. Approximately $88,226 was drawn and outstanding with maximum capacity totaling $125,000. Certain of these foreign seasonal borrowings are secured by certain of the subsidiary borrowers' accounts receivable and inventories totalling $38,596 and restrict the payment of dividends by the subsidiary borrower during the term of the agreement. The Company records outstanding borrowings under its foreign seasonal revolver agreement as long-term as the Company intends to extend repayment terms to the maturity date in accordance with the agreement.

Dividends

The Fifth Amendment to the Credit Agreement eliminated the basket for restricted payments for the term of the Credit Agreement and accordingly, the Company may not pay any dividends under the Credit Agreement for its remaining term. In addition, the indenture governing its senior notes contains similar restrictions and also prohibits the payment of dividends and other distributions if the Company fails to satisfy a ratio of consolidated EBITDA to fixed charges of at least 2.0 to 1.0. At March 31, 2012, the Company did not satisfy this fixed charge coverage ratio. The Company may from time to time not satisfy this ratio.

Summary of Debt

The following table summarizes the Company’s debt financing as of March 31, 2012:



					March 31, 2012
	Outstanding				Lines and
	March 31, 2011		March 31, 2012		Letters		Interest			Long Term Debt Repayment Schedule
					Available		Rate			2013		2014		2015		2016		2017		Later
Senior secured credit facility:
Revolver ⁽¹⁾	$	148,000	$	—	$	290,000	6.0	%	⁽²⁾	$	—	$	—	$	—	$	—	$	—	$	—
Senior notes:
10% senior notes due 2016 ⁽⁴⁾	611,756		615,189		—		10.0	%		—		—		—		—		615,189		—
8 ½% senior notes due 2012	6,000		6,000		—		8.5	%		6,000		—		—		—		—		—
	617,756		621,189		—					6,000		—		—		—		615,189		—
5 ½% convertible senior subordinated notes due 2014	115,000		115,000		—		5.5	%		—		—		115,000		—		—		—
Long-term foreign seasonal borrowings	—		88,226		36,774		3.7	%	⁽²⁾	—		88,226		—		—		—		—
Other long-term debt	4,399		4,088		281		6.6	%	⁽²⁾	1,050		1,268		944		546		3		277
Notes payable to banks ⁽³⁾	231,407		374,532		266,641		2.9	%	⁽²⁾	—		—		—		—		—		—
Total debt	$	1,116,562	$	1,203,035	593,696					$	7,050	$	89,494	$	115,944	$	546	$	615,192	$	277
Short term	$	231,407	$	374,532
Long term:
Long term debt current	$	784	$	7,050
Long term debt	884,371		821,453
	$	885,155	$	828,503
Letters of credit	$	4,859	$	7,239	6,742
Total credit available					$	600,438

(1) As of March 31, 2012, pursuant to Section 2.1 (A) (iv) of the Credit Agreement, the full Revolving Committed Amount was available based on the calculation of the lesser of the Revolving Committed Amount and the Working Capital Amount.

(2) Weighted average rate for the twelve months ended March 31, 2012.

(3) Primarily foreign seasonal lines of credit.

(4) Repayment of $615,189 is net of original issue discount of $19,811. Total repayment will be $635,000.