DEBT |
12 Months Ended | ||||||||||||||||||||||||
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Mar. 31, 2016 | |||||||||||||||||||||||||
| Debt Disclosure [Abstract] | |||||||||||||||||||||||||
| DEBT |
DEBT
Convertible Subordinated Debt
4.50% Notes
On October 31, 2012, we issued $60 million aggregate principal amount of 4.50% convertible subordinated notes due November 15, 2017, and on November 6, 2012 we issued an additional $10 million aggregate principal amount of 4.50% convertible subordinated notes due November 15, 2017 pursuant to an over-allotment provision (“4.50% notes”). These notes are convertible into shares of our common stock at a conversion rate of 607.1645 shares per $1,000 principal amount, a conversion price of approximately $1.65 per share. We may not redeem the notes prior to their maturity date although investors may convert the 4.50% notes into Quantum common stock until November 14, 2017 at their option. In addition, since purchasers are qualified institutional investors, as defined in Rule 144A under the Securities Act of 1933 (“Securities Act”), the 4.50% notes have not been registered under the Securities Act. We pay 4.50% interest per annum on the principal amount of the 4.50% notes semi-annually on May 15 and November 15 of each year beginning in May 2013. The terms of the 4.50% notes are governed by an agreement dated October 31, 2012 between Quantum and U.S. Bank National Association. The 4.50% notes are subordinated to any existing indebtedness and other liabilities. We incurred and capitalized $2.3 million of fees for the 4.50% notes which are included in convertible subordinated debt, long-term in our Consolidated Balance Sheets as a direct deduction of the carrying amount of the 4.50% notes as of March 31, 2016 and 2015. These fees are amortized to interest expense over the term of the notes.
3.50% Notes
On November 15, 2010, we issued $135 million aggregate principal amount of 3.50% convertible subordinated notes due November 15, 2015 with a conversion price of $4.33 per share of our common stock (“3.50% notes”). We incurred and capitalized $5 million of loan fees in fiscal 2011 for the 3.50% notes which were included in convertible subordinated debt, short-term in our Consolidated Balance Sheets as a direct deduction of the carrying amount of the 3.50% notes as of March 31, 2015. These fees were amortized to interest expense over the term of the notes.
On March 11, 2014, we entered into a private transaction with a note holder to purchase $1.3 million of aggregate principal amount of notes for $1.3 million. On January 28, 2015, we entered into a private transaction with a note holder to purchase $50 million of aggregate principal amount for $51 million. In connection with this transaction, we recorded a loss on debt extinguishment of $1.3 million comprised of the loss of $1 million from the notes purchased and a write-off of $0.3 million of unamortized debt issuance costs related to the purchased notes. We also paid accrued interest on the purchased notes of $0.4 million. We funded these transactions using cash on hand.
On October 5, 2015, we entered into a private transaction with a note holder to purchase $81.0 million of aggregate principal amount for $82.4 million, which included $1.1 million of accrued interest. In connection with this transaction, we recorded a loss on debt extinguishment of $0.4 million comprised of a loss of $0.3 million from the notes purchased and $0.1 million of unamortized debt issuance costs related to the purchased notes. We used a combination of $66.1 million of proceeds from our credit agreement with Wells Fargo and $16.3 million of cash to fund the purchase and pay the accrued interest. On November 15, 2015, we purchased the remaining $2.8 million of the 3.50% notes and funded this payment using proceeds from the credit agreement with Wells Fargo.
Wells Fargo Credit Agreement
On March 29, 2012, we refinanced a secured credit agreement with Credit Suisse by entering into a senior secured credit agreement (“WF credit agreement”) with Wells Fargo Capital Finance, LLC. We incurred and capitalized $1.0 million of fees related to the WF credit agreement which are included in other long-term assets in our Consolidated Balance Sheets. These fees are being amortized to interest expense over the term of the WF credit agreement in the Consolidated Statements of Operations.
On April 24, 2014, the WF credit agreement was amended to allow us to use proceeds from the credit agreement to repay the convertible subordinated notes so long as we have a fixed charge coverage ratio of 1.5 and liquidity of $25 million. The amendment also impacted the available line, maturity date and certain covenants and compliance obligations which are reflected below. In addition, there were amendments in fiscal 2013 and fiscal 2014, including an amendment to allow the assignment of one third of the total revolver commitment to Silicon Valley Bank and other conforming and related modifications.
On August 7, 2015, the WF credit agreement was amended to modify the maturity date, increase the amount of foreign accounts receivable and intellectual property assets included in our borrowing base and add an additional liquidity covenant.
On April 15, 2016, the WF credit agreement was amended to modify the maturity date, increase the excess availability requirement over time and reduce the maximum amount of intellectual property assets that may be included in the borrowing base over time.
Under the WF credit agreement, as amended, we have the ability to borrow the lesser of $75 million or the amount of the monthly borrowing base under a senior secured revolving credit facility, which matures August 10, 2017. As of March 31, 2016, we had a $65.7 million outstanding balance on the line of credit at a weighted average interest rate of 3.18%. In addition, we have letters of credit totaling $1.0 million, reducing the amount available to borrow to $8.3 million at March 31, 2016. Quarterly, we are required to pay a .375% commitment fee on undrawn amounts under the revolving credit facility.
There is a blanket lien on all of our assets under the WF credit agreement in addition to certain financial and reporting covenants.
The interest rate on amounts borrowed is based on an election by us of an annual rate equal to (1) a base rate established by Wells Fargo plus an applicable margin of 1.0% to 1.5%, based on availability levels under the WF credit agreement or (2) the LIBOR rate plus an applicable margin ranging from 2.0% and 2.5%, based on availability levels under the WF credit agreement. The base rate is defined in the WF credit agreement.
The WF credit agreement contains financial covenants and customary events of default for such securities, including cross-payment default and cross-acceleration to other material indebtedness for borrowed money which require notice from the trustee or holders of at least 25% of the notes and are subject to a cure period upon receipt of such notice. Average liquidity must exceed $15 million each month, and at all times we must maintain minimum liquidity of $10 million, at least $5 million of which must be excess availability under the WF revolving credit facility. The excess availability requirement increases by $1.5 million on June 1, 2016, and on the first day of each September, December, March and June occurring thereafter. The fixed charge coverage ratio is required to be greater than 1.2 for the 12 month period ending on the last day of any month in which the covenant is applicable. This covenant is applicable only in months in which borrowings exceed $5 million at any time during the month. To avoid triggering mandatory field audits and Wells Fargo controlling our cash receipts, we must maintain liquidity of at least $20 million at all times. The fixed charge coverage ratio, average liquidity, liquidity and excess availability are each defined in the WF credit agreement and/or amendments thereto. Certain schedules in the compliance certificate must be filed monthly if borrowings exceed $5 million; otherwise they are to be filed quarterly. As of March 31, 2016, and during fiscal 2016, we were in compliance with all covenants.
Debt Maturities
A summary of the scheduled maturities for our outstanding debt as of March 31, 2016 follows (in thousands):
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