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v2.3.0.11
Notes Payable and Long-term Debt
6 Months Ended
Jul. 03, 2011
Notes Payable and Long-term Debt [Abstract]  
Notes Payable and Long-term Debt
Note 5 — Notes Payable and Long-term Debt
On November 10, 2009, Colt Defense LLC (Parent), our parent company, and Colt Finance Corp, a 100%-owned finance subsidiary of Parent, jointly and severally co-issued $250,000 of unsecured senior notes (“the senior notes”). Proceeds from the offering of the senior notes were used to repay the outstanding balances of our then outstanding senior secured credit facility and senior subordinated notes ($189,281), settle outstanding interest rate swap agreements ($5,395), pay a prepayment premium on our senior subordinated notes ($581), pay bank legal costs associated with the prepayment ($9) and pay financing costs ($12,848). The balance of the proceeds was available for general corporate purposes.
Concurrently with the issuance of the senior notes, we entered into a senior secured credit facility, consisting of a $50,000 revolving credit line (the “revolver”). On November 1, 2010, the revolver was amended to provide for a $10,000 letter of credit facility only.
Senior Notes
The $250,000 senior notes bear interest at 8.75% and mature November 15, 2017. Interest is payable semi-annually in arrears on May 15 and November 15, commencing on May 15, 2010. We issued the senior notes at a discount of $3,522 from their principal value. This discount will be amortized as additional interest expense over the life of the indebtedness. No principal repayments are required until maturity. However, in the event of a change in control of our company, we are required to offer to purchase the senior notes at a price equal to 101% of their principal amount, together with accrued and unpaid interest.
The senior notes are not guaranteed by any of our subsidiaries and do not have any financial condition covenants that require us to maintain compliance with any financial ratios or measurements on a periodic basis. The senior notes do contain non-financial condition covenants that, among other things, limit our ability to incur additional indebtedness, enter into certain mergers or consolidations, incur certain liens and engage in certain transactions with our affiliates. Under certain circumstances, we are required to make an offer to purchase our senior notes offered hereby at a price equal to 100% of the principal amount thereof, plus accrued and unpaid interest to the date of purchase with the proceeds of certain asset dispositions. In addition, the indenture restricts our ability to pay dividends or make other Restricted Payments (as defined in the indenture) to our members, subject to certain exceptions, unless certain conditions are met, including that (1) no default under the indenture shall have occurred and be continuing, (2) we shall be permitted by the indenture to incur additional indebtedness and (3) the amount of distributions to our unit holders may not exceed a certain amount based on, among other things, our consolidated net income. Such restrictions are not expected to affect our ability to meet our cash obligations for the next 12 months. Additionally, the senior notes contain certain cross default provisions with other indebtedness, if such indebtedness in default aggregates to $20,000 or more.
The outstanding loan balances at July 3, 2011 and December 31, 2010 were as follows:
                 
    July 3, 2011     December 31, 2010  
Senior notes principal amount
  $ 250,000     $ 250,000  
Unamortized discount
    (2,990 )     (3,162 )
 
           
 
    247,010       246,838  
Less: current portion
           
 
           
 
  $ 247,010     $ 246,838  
 
           
                                 
    Three Months Ended   Six Months Ended
    July 3, 2011   July 4, 2010   July 3, 2011   July 4, 2010
Effective interest rate
    9.0 %     9.1 %     9.0 %     9.1 %
Amortization of discount
  $ 86     $ 78     $ 172     $ 158  
Amortization of deferred financing costs
  $ 363     $ 458     $ 726     $ 916  
Revolver (Senior Secured Credit Facility)
From November 10, 2009 through October 31, 2010, the Company was party to a $50,000 revolver. On November 1, 2010, the revolver was amended to provide for a $10,000 letter of credit facility only. The letter of credit facility exists for the sole purpose of supporting our letter of credit requirements. Loans under the letter of credit facility bear interest at our option at a rate equal to LIBOR plus 3.75% or an alternate base rate plus 2.75% (with the base rate defined as the higher of (a) the prime rate or (b) the Federal funds rate plus 0.50% or (c) the one-month LIBOR rate plus 1.00%). The letter of credit facility matures January 31, 2014. Obligations under this facility are secured by substantially all of our assets.
We are subject to a non-financial condition covenant limiting our maximum capital expenditures made in the ordinary course of business in any year to $10,000, with provisions to carryover up to $5,000 of the unused amounts to the succeeding year. We were in compliance with this non-financial condition covenant as of and through July 3, 2011.
As of July 3, 2011, there were $632 standby letters of credit outstanding against the $10,000 letter of credit facility.