What is the primary purpose of the new security agreements (share charges and debentures)?

The new security agreements were entered into to fulfill the security and collateral requirements stipulated in Seagate's existing Credit Agreement and its Senior Secured Notes Indenture. They provide lenders with collateral over specific assets and shares.

What is the financial impact of the anticipated impairment charge?

The company expects a non-cash charge of approximately $64 million in the first quarter of fiscal year 2010. This charge is to write down certain assets related to discontinued research activities to their fair value less cost to sell. Importantly, this is a non-cash charge and is not expected to result in any material future cash expenditures.

Which subsidiaries are involved in these new security arrangements?

The primary subsidiaries involved are Seagate Technology International (STI), a wholly owned subsidiary of Seagate Technology plc, and Seagate Singapore International Headquarters Pte. Ltd. (Seagate Singapore), a wholly owned subsidiary of STI.

What assets are being pledged as collateral?

The collateral includes all of STI's rights, title, and interest in and to all present and future shares of Seagate Singapore and related dividends. Additionally, Seagate Singapore has granted security interests in substantially all of its assets, including real property in Singapore and bank accounts.

STX 8-K: Material Agreements & Financial Events

Summary

This 8-K filing from Seagate Technology Holdings plc (STX) on October 1, 2009, primarily details the creation of new security interests related to its existing credit agreement and senior secured notes. Specifically, a wholly-owned subsidiary, Seagate Technology International (STI), and its subsidiary, Seagate Singapore International Headquarters Pte. Ltd. (Seagate Singapore), have entered into share charges and debentures. These agreements grant first and second ranking security interests to JPMorgan Chase Bank, N.A. (as Administrative Agent) and Wells Fargo Bank, National Association (as Collateral Agent), respectively, over shares and assets of Seagate Singapore. Additionally, the report discloses an anticipated non-cash impairment charge of approximately $64 million in the first quarter of fiscal year 2010. This charge relates to the planned sale of certain equipment associated with research activities that have been discontinued. Investors should note that these charges are expected to be non-cash and should not result in material future cash expenditures. The filing also incorporates by reference previous disclosures regarding the Credit Agreement and the Senior Secured Notes Indenture.

Key Highlights

1Seagate Technology International (STI) and Seagate Singapore International Headquarters Pte. Ltd. entered into new security agreements (share charges and debentures) as of September 25, 2009.
2These security interests are in favor of JPMorgan Chase Bank, N.A. (Administrative Agent) and Wells Fargo Bank, National Association (Collateral Agent).
3The agreements grant first ranking security over shares of Seagate Singapore to JPMorgan Chase Bank, N.A.
4Second ranking security over shares of Seagate Singapore is granted to Wells Fargo Bank, National Association.
5Seagate Singapore has granted security interests in substantially all of its assets, including real property and bank accounts, to both agents.
6The Company anticipates a non-cash impairment charge of approximately $64 million in Q1 FY2010.
7The impairment charge is related to the planned sale of equipment from ceased research activities and is expected to be non-cash.

Seagate Technology Holdings plc 8-K Report, Material Agreement (Oct 1, 2009)

Summary

Key Highlights

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