As of October 3, 2021, the remaining unamortized discount was $13.0 million, which will be amortized over 2.3 years using the effective interest rate method. The carrying amount of the equity component was $100.8 million.
As of October 3, 2021, the conversion price was approximately $31.53 per share and the
if-converted
value of the notes was $1,364.6 million.
During the three and nine months ended October 3, 2021, certain debt holders elected to convert $235.2 million and $302.0 million, respectively, of debt principal. The conversions in the three and nine months ended October 3, 2021 resulted in a loss of $20.2 million and $25.4 million, respectively, recorded to other (income) expense, net in the consolidated statement of operations. The conversion of the debt was settled in cash for principal amount and in shares for the excess of conversion value over principal amount. The 7.2 million shares issued to the debt holders were received from exercising the convertible notes hedge call options.
Additional conversions of approximately $41.0 million of debt principal will occur in the fourth quarter of 2021. The liability component is included in current debt and the equity component is included in convertible common shares.
Revolving Credit Facility
On May 1, 2020, Teradyne entered into a credit agreement (the “Credit Agreement”) with Truist Bank, as administrative agent and collateral agent, and the lenders party thereto. The Credit Agreement provides for a three-year, senior secured revolving credit facility of $400.0 million (the “Credit Facility”). The Credit Agreement further provides that, subject to customary conditions, Teradyne may seek to obtain from existing or new lenders incremental commitments under the Credit Facility in an aggregate principal amount not to exceed $150.0 million.
Proceeds from the Credit Facility may be used for general corporate purposes and working capital. Teradyne incurred $3.5 million in costs related to the revolving credit facility. These costs are being amortized over the three-year term of the revolving credit facility and are included in interest expense in the statement of operations. As of November 5, 2021, Teradyne has not borrowed any funds under the Credit Facility.
The interest rates applicable to loans under the Credit Facility are, at Teradyne’s option, equal to either a base rate plus a margin ranging from 0.50% to 1.25% per annum or LIBOR, a minimum of 0.75%, plus a margin ranging from 1.50% to 2.25% per annum, based on the consolidated leverage ratio of Teradyne. In addition, Teradyne will pay a commitment fee on the unused portion of the commitments under the Credit Facility ranging from 0.25% to 0.40% per annum, based on the then applicable consolidated leverage ratio.
Teradyne is not required to repay any loans under the Credit Facility prior to maturity, subject to certain customary exceptions. Teradyne is permitted to prepay all or any portion of the loans under the Credit Facility prior to maturity without premium or penalty, other than customary LIBOR breakage costs.
The Credit Agreement contains customary events of default, representations, warranties and affirmative and negative covenants that, among other things, limit Teradyne’s ability to sell assets, grant liens on assets, incur other secured indebtedness and make certain investments and restricted payments, all subject to exceptions set forth in the Credit Agreement. The Credit Agreement also requires Teradyne to satisfy two financial ratios measured as of the end of each fiscal quarter: a consolidated leverage ratio and an interest coverage ratio.
The Credit Facility is guaranteed by certain of Teradyne’s domestic subsidiaries and collateralized by assets of Teradyne and such subsidiaries, including a pledge of 65% of the capital stock of certain foreign subsidiaries.
As of November 5, 2021, Teradyne was in compliance with all covenants.
