Short-Term and Long-Term Debt

3 Months Ended

Jan. 31, 2020

SHORT-TERM AND LONG-TERM DEBT

New 2025 Term Loan

Pursuant to a Credit Agreement, dated July 15, 2014, as amended (the “Credit Agreement”), by and among Ciena, the lenders party thereto and Bank of America, N.A., as administrative agent (the “Administrative Agent”), Ciena maintained an existing senior secured term loan with an outstanding aggregate principal amount of $693.0 million as of January 23, 2020 and maturing on September 28, 2025 (the “Old 2025 Term Loan”).

On January 23, 2020, Ciena, as borrower, and Ciena Communications, Inc., Ciena Government Solutions, Inc., Ciena Communications International, LLC and Blue Planet Software, Inc., as guarantors, entered into a Refinancing Amendment to Credit Agreement with the lenders party thereto and the Administrative Agent (the “Refinancing Agreement”), pursuant to which Ciena consummated a permitted refinancing of the entire outstanding amount of the Old 2025 Term Loan, and in accordance therewith, incurred new senior secured term loans in an aggregate principal amount of $693.0 million and maturing on September 28, 2025 (the “New 2025 Term Loan”). The proceeds of the New 2025 Term Loan were used in their entirety to

refinance the 2025 Term Loan. This arrangement was primarily accounted for as a modification of debt and, as such, $0.1 million of debt issuance costs associated with the New 2025 Term Loan was expensed.

The Refinancing Agreement amends the Credit Agreement and provides that the New 2025 Term Loan will, among other things:


•	mature on September 28, 2025;


•	amortize in equal quarterly installments in aggregate amounts equal to 0.25%, or $1.73 million, of the principal amount of the New 2025 Term Loan as of January 23, 2020, with the balance payable at maturity;


•	be subject to mandatory prepayment provisions on the occurrence of certain specified events substantially similar to the 2025 Term Loan, including certain asset sales, debt issuances, and receipt of annual Excess Cash Flow (as defined in the Credit Agreement);


•	bear interest, at Ciena’s election, at a per annum rate equal to (a) LIBOR (subject to a floor of 0.00%) plus an applicable margin of 1.75%, or (b) a base rate (subject to a floor of 1.00%) plus an applicable margin of 0.75%; and


•	be repayable at any time at Ciena’s election, provided that repayment of the New 2025 Term Loan with proceeds of certain indebtedness prior to July 23, 2020 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment.

Except as amended by the Refinancing Agreement, the remaining terms of the Credit Agreement remain in full force and effect.

The net carrying values of Ciena’s term loans were comprised of the following for the fiscal periods indicated (in thousands):



	January 31, 2020										October 31, 2019
	Principal Balance		Unamortized Discount			Deferred Debt Issuance Costs			Net Carrying Value		Net Carrying Value
Term Loan Payable due September 28, 2025 (New)	$	693,000	$	(1,824	)	$	(3,390	)	$	687,786	$	—
Term Loan Payable due September 28, 2025 (Old)	$	—	$	—		$	—		$	—	$	687,406

Deferred debt issuance costs that were deducted from the carrying amounts of the term loans totaled $3.4 million at January 31, 2020 and $3.6 million at October 31, 2019. Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate, through the maturity of the term loans. The amortization of deferred debt issuance costs for these term loans are included in interest expense, and were $0.2 million during the first three months of fiscal 2020 and fiscal 2019. The carrying value of the term loans listed above is also net of any unamortized debt discounts.

As of January 31, 2020, the estimated fair value of the New 2025 Term Loan was $694.7 million. Ciena’s term loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its term loan using a market approach based on observable inputs, such as current market transactions involving comparable securities.