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REVOLVING CREDIT FACILITY | 12 Months Ended
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Oct. 28, 2023
Line of Credit Facility [Abstract] |
REVOLVING CREDIT FACILITY | SHORT-TERM AND LONG-TERM DEBT 2030 New Term Loan On October 24, 2023, Ciena, together with certain of its domestic subsidiaries as guarantors, entered into an Incremental Amendment Agreement (the “Amendment”) to its Credit Agreement, dated July 15, 2014, as amended (the “Credit Agreement”), by and among Ciena, certain of its subsidiaries, the lenders party thereto, and Bank of America, N.A., as administrative agent (“Bank of America”), to which Ciena incurred a new tranche of senior secured term loans in an aggregate principal amount of $1.2 billion (the “2030 New Term Loan”) and a new senior secured revolving credit facility of $300 million (the “Revolving Credit Facility” as defined in Note 20 below). The proceeds of the 2030 New Term Loan, net of original issuance discount, replaced, in full, $668.7 million of outstanding principal of the 2025 Term Loan and $497.5 million of outstanding principal of the 2030 Term Loan (as defined below) (“Refinanced Term Loans”), including accrued interest, and pay transaction fees and expenses, resulting in proceeds of $0.8 million. The 2030 New Term Loan requires Ciena to make installment payments of $2.9 million on a quarterly basis. Based on the continuation of existing lenders and the addition of new lenders, this arrangement was primarily accounted for as a modification of debt and, as such, $6.0 million of debt issuance costs associated with the 2030 New Term Loan were expensed. The aggregate balance of approximately $4.4 million of debt issuance costs and approximately $2.2 million of original discount from the 2025 Term Loan and 2030 Term Loan, $0.1 million of debt issuance costs associated with new lenders for the 2030 New Term Loan, and approximately $2.9 million of original discount from the 2030 New Term Loan, were included in the carrying value of the 2030 New Term Loan. The Amendment amends the Credit Agreement and provides that the 2030 New Term Loan will, among other things: •mature on October 24, 2030; •amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the principal amount of the 2030 New Term Loan as of January 19, 2023, or $2.9 million, or $11.7 million annually, with the balance payable at maturity; •be subject to mandatory prepayment upon the occurrence of certain specified events substantially similar to the Refinanced Term Loans, including upon the occurrence of certain specified events such as 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) SOFR (subject to a floor of 0.00%) plus an applicable margin of 2.00%, or (b) a base rate (subject to a floor of 1.00%) plus an applicable margin of 1.00%; and •be repayable at any time at Ciena’s election, provided that repayment of the 2030 New Term Loan with proceeds of certain indebtedness prior to April 24, 2024 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment. Among other things, the Amendment also amends the Credit Agreement by (i) modifying the “accordion” feature to provide for incremental term loan facilities (the “Incremental Term Loans”) in an aggregate amount not to exceed the sum of (A) the greater of (1) $640 million and (2) an amount equal to consolidated EBITDA on a pro forma basis for the most recently ended four-quarter period and (B) an amount (1) in the case of secured incremental term facilities that rank pari passu with or junior to the 2030 New Term Loan, such that the Total Secured Net Leverage Ratio (as defined in the Credit Agreement) would not be greater than 3.00 to 1.00 at the time of incurrence and (2) in the case of unsecured incremental term facilities, such that the Interest Coverage Ratio (as defined in the Credit Agreement) would not be less than 2.00 to 1.00 at the time of incurrence, subject to certain conditions, including obtaining commitments from any one or more lenders, whether or not currently party to the Credit Agreement, to provide such increased amounts and (ii) amending certain negative covenants. The net carrying value of the 2030 New Term Loan was comprised of the following as of the date indicated (in thousands):
|  | October 28, 2023 |  |
|  | Principal Balance |  | Unamortized Discount |  | Deferred Debt Issuance Costs |  | Net Carrying Value |  |
2030 New Term Loan |  | $ | 1,170,000 |  |  | $ | (5,122) |  |  | $ | (5,507) |  |  | $ | 1,159,371 |  |  |
Deferred debt issuance costs that were deducted from the carrying amount of the 2030 New Term Loan totaled $5.5 million as of October 28, 2023. 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 2030 New Term Loan. The amortization of deferred debt issuance costs for the 2030 New Term Loan is included in interest expense, and was $0.1 million during fiscal 2023. As of October 28, 2023, the estimated fair value of the 2030 New Term Loan was $1.2 billion. The 2030 New Term Loan is categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2030 New Term Loan using a market approach based on observable inputs, such as current market transactions involving comparable securities. Refinanced Term Loans The proceeds of the 2030 New Term Loan, net of original issuance discount, was used to repay in full $1.2 billion of outstanding principal of the Refinanced Term Loans, including accrued interest. 2025 Term Loan On January 19, 2023, in connection with the Incremental Agreement (as defined below) to the Credit Agreement (as defined below), the Credit Agreement was amended to replace LIBOR with SOFR for the 2025 Term Loan in response to pending impact of FASB Accounting Standards Codification 848, Reference Rate Reform. The net carrying value of the 2025 Term Loan as of October 29, 2022 was $673.0 million. Deferred debt issuance costs are amortized using the straight-line method, which approximates the effect of the effective interest rate method, through the maturity of the 2025 Term Loan. The amortization of deferred debt issuance costs for the 2025 Term Loan is included in interest expense, and was $0.6 million for fiscal 2023 and fiscal 2022. 2030 Term Loan On January 19, 2023, Ciena entered into an Incremental Joinder and Amendment Agreement (the “Incremental Agreement”) to its Credit Agreement, dated July 15, 2014, as amended, by and among Ciena, the lenders party thereto and Bank of America, N.A., as administrative agent, pursuant to which Ciena incurred a new tranche of senior secured term loans in an aggregate principal amount of $500.0 million and maturing on January 19, 2030 (the “2030 Term Loan”). Net of original issue discount and debt issuance costs, the $492.5 million in proceeds from the 2030 Term Loan were intended to be used for general corporate purposes. The Incremental Agreement amended the Credit Agreement and provided that the 2030 Term Loan would, among other things: •mature on January 19, 2030; •amortize in equal quarterly installments in aggregate amounts equal to 0.25% of the principal amount of the 2030 Term Loan as of January 19, 2023, or $1.25 million, with the balance payable at maturity; •be subject to mandatory prepayment on the same basis as the 2025 Term Loan, including on the occurrence of certain specified events such as 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) SOFR (subject to a floor of 0.00%) plus an applicable margin of 2.50%, or (b) a base rate (subject to a floor of 1.00%) plus an applicable margin of 1.50%; and •be repayable at any time at Ciena’s election, provided that repayment of the 2030 Term Loan with proceeds of certain indebtedness prior to July 19, 2023 will require a prepayment premium of 1.00% of the aggregate principal amount of such prepayment. Except as amended by the Incremental Agreement, the remaining terms of the Credit Agreement remained in full force and effect. 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 2030 Term Loan. The amortization of deferred debt issuance costs for the 2030 Term Loan is included in interest expense and was $0.5 million for fiscal 2023. 2030 Notes On January 18, 2022, Ciena entered into an Indenture (the “Indenture”) among Ciena, as issuer, certain domestic subsidiaries of Ciena, as guarantors (collectively, the “Guarantors”), and U.S. Bank National Association, as trustee (the “Trustee”), pursuant to which Ciena issued $400.0 million in aggregate principal amount of 4.00% senior notes due 2030 (the “2030 Notes”). The net carrying value of the 2030 Notes was comprised of the following for the period indicated (in thousands):
|  | October 28, 2023 |  | October 29, 2022 |  |
|  | Principal Balance |  | Deferred Debt Issuance Costs |  | Net Carrying Value |  | Net Carrying Value |  |
2030 Senior Notes 4.00% fixed-rate |  | $ | 400,000 |  |  | $ | (4,265) |  |  | $ | 395,735 |  |  | $ | 395,045 |  |  |
Deferred debt issuance costs that were deducted from the carrying amount of the 2030 Notes totaled $4.3 million as of October 28, 2023 and $5.0 million as of October 29, 2022. 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 2030 Notes. The amortization of deferred debt issuance costs for the 2030 Notes is included in interest expense, and was $0.7 million during fiscal 2023 and $0.5 million during fiscal 2022. As of October 28, 2023, the estimated fair value of the 2030 Notes was $330.5 million. The 2030 Notes are categorized as Level 2 in the fair value hierarchy. Ciena estimated the fair value of its 2030 Notes using a market approach based on observable inputs, such as current market transactions involving comparable securities. REVOLVING CREDIT FACILITY On February 10, 2023, pursuant to an ABL Credit Agreement dated October 28, 2019, as amended (the “ABL Credit Agreement”), by and among Ciena, certain of its subsidiaries, the lenders party thereto (the “ABL Lenders”), and Bank of America, as administrative agent, Ciena modified its senior secured asset-backed revolving credit facility (the “ABL Credit Facility”), which provided for a total commitment of $300.0 million to extend its maturity date to September 28, 2025. On October 24, 2023 (the “Closing Date”), pursuant to the Incremental Amendment Agreement to the Credit Agreement (as defined in Note 19 above), Ciena incurred a new senior secured revolving credit facility of $300.0 million (the “Revolving Credit Facility”), which replaced the ABL Credit Facility. Ciena has the option to increase the total revolving commitments under the Revolving Credit Facility to $450.0 million, subject to certain conditions, including obtaining commitments from one or more lenders. The Credit Agreement provides that $200.0 million of the Revolving Credit Facility is available for issuances of letters of credit and allows for swingline loans in an amount not to exceed $50.0 million. On or about the Closing Date, Ciena transferred to the Revolving Credit Facility certain outstanding letters of credit initially issued under the ABL Credit Facility with an undrawn amount of approximately $65.1 million. There were no borrowings outstanding under the ABL Credit Facility as of the Closing Date. Ciena expects to use the Revolving Credit Facility to support the issuance of letters of credit that arise in the ordinary course of its business and for general corporate purposes. The Credit Agreement provides that the Revolving Credit Facility will, among other things: •mature on October 24, 2028; •bear interest on outstanding borrowings, at Ciena’s election, at a per annum rate equal to (a) SOFR (subject to a floor of 0.00%) plus a credit spread adjustment of 0.10% plus an applicable margin ranging from 1.375% to 2.00%, or (b) a base rate (subject to a floor of 1.00%) plus an applicable margin ranging from 0.375% to 1.00%, in each case, with the actual margin determined according to the Total Net Leverage Ratio (as defined in the Credit Agreement above); •have a commitment fee payable on the unused portion of the Revolving Credit Facility at a per annum rate ranging from 0.225% to 0.300%, with the actual rate determined according to the Total Net Leverage Ratio; and •include a restriction on the aggregate amount of Incremental Term Loans and certain other indebtedness that can be incurred in the future equal to an amount that would not result in the Total Net Leverage Ratio exceeding 5.00 to 1.00 at the time of incurrence. The obligations under the Revolving Credit Facility are guaranteed by all of Ciena’s subsidiaries that currently, or in the future are required to, guarantee the obligations of the 2030 New Term Loan, including, as of the Closing Date, Ciena Communications, Inc., Ciena Government Solutions, Inc., Ciena Communications International, LLC and Blue Planet Software, Inc., and are secured on a pari passu basis with the 2030 New Term Loan by a pledge of substantially all of the assets of Ciena and the guarantors. Upon the occurrence of certain events related to the improvement of Ciena’s credit rating and repayment of all secured term loans (“Investment Grade Events”), all collateral securing the obligations under the Revolving Credit Facility will be released at Ciena’s election. Under the Revolving Credit Facility, Ciena is also required to maintain certain financial maintenance covenants, including: •prior to an Investment Grade Event, a maximum Total Secured Net Leverage Ratio of no greater than 3.50 to 1.00 as of the end of any period of four fiscal quarters (provided, that in the event Ciena consummates a qualifying acquisition, Ciena can elect to increase the maximum Total Secured Net Leverage Ratio level to 4.00 to 1.00 for the fiscal quarter in which such qualifying acquisition is consummated and for the next five consecutive fiscal quarters); •on or after an Investment Grade Event, a maximum Total Net Leverage Ratio of no greater than 4.00 to 1.00 as of the end of any period of four fiscal quarters; and •a minimum Interest Coverage Ratio of no less than 3.00 to 1.00 as of the end of any period of four fiscal quarters. Except as amended by the Amendment, the remaining terms of the Credit Agreement remain in full force and effect. As of October 28, 2023, Ciena was in compliance with the above financial maintenance covenants. As of October 28, 2023, letters of credit totaling $72.5 million were issued under our Revolving Credit Facility. There were no borrowings outstanding under the Revolving Credit Facility as of October 28, 2023.

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