In order to increase its “flexibility in meeting its obligations” under its current credit agreement”, Seagate Technology on Friday renegotiated some of the terms of its credit facility with JPMorgan Chase, Morgan Stanley, BNP Paribas, Keybank National, Wachovia and the Bank of Nova Scotia.
The new terms will allow the company’s “net leverage ratio” — basically the amount of debt it may hold divided by its cash and other short-term investments — to rise from the original 1.50 to 1.80 during its current quarter and to as high as 2.65 for the quarter ended Oct. 2.
The amended agreement also calls for the interest rate to increase to 350 basis points above the LIBOR rate.
Seagate will have to maintain $600 million worth of cash and short-term investments at the end of each month in the meantime, and it agreed to reduce the amount it could borrow under the agreement to $350 million from $500 million.
Seagate also agreed to “further limitations” on the amount of other debt it could take on, or shares it could repurchase. It spent $3 billion dollars buying back its own stock during its last two fiscal years. It made no such purchases during the first two quarters of fiscal 2009, despite a 70 percent plunge in its stock price during that period.