Kroger 2012 Annual Report Download - page 107

A-49
NO T E S T O C O N S O L I D A T E D F I N A N C I A L S T A T E M E N T S , CO N T I N U E D
In 2011, the Company issued $450 of senior notes bearing an interest rate of 2.20% due in fiscal year
2016. The proceeds of this issuance of senior notes were used to fund a portion of the Company’s obligations
under the UFCW consolidated multi-employer pension fund. In 2011, the Company repaid $478 of senior
notes bearing an interest rate of 6.80%.
In 2012, the Company issued $500 of senior notes due in fiscal year 2022 bearing an interest rate of
3.40% and $350 of senior notes due in fiscal year 2042 bearing an interest rate of 5.00%. In 2012, the Company
repaid upon their maturity $491 of senior notes bearing an interest rate of 6.75%, $346 of senior notes bearing
an interest rate of 6.20% and $500 of senior notes bearing an interest rate of 5.50%.
On January 25, 2012, the Company amended and extended its $2,000 unsecured revolving credit
facility. The Company entered into the amended credit facility to amend and extend the Company’s existing
credit facility which would have terminated on May 15, 2014. The amended credit facility provides for a
$2,000 unsecured revolving credit facility (the “Credit Agreement”), with a termination date of January 25, 2017,
unless extended as permitted under the Credit Agreement. The Company has the ability to increase the size
of the Credit Agreement by up to an additional $500, subject to certain conditions.
Borrowings under the Credit Agreement bear interest at the Company’s option, at either (i) LIBOR plus
a market rate spread, based on the Company’s Leverage Ratio or (ii) the base rate, defined as the highest
of (a) the Bank of America prime rate, (b) the Federal Funds rate plus 0.5%, and (c) one-month LIBOR plus
1.0%, plus a market rate spread based on the Company’s Leverage Ratio. The Company will also pay a
Commitment Fee based on the Leverage Ratio and Letter of Credit fees equal to a market rate spread based
on the Company’s Leverage Ratio. The Credit Agreement contains covenants, which, among other things,
require the maintenance of a Leverage Ratio of not greater than 3.50:1.00 and a Fixed Charge Coverage Ratio
of not less than 1.70:1.00. In the first quarter of 2012, the covenants were amended to exclude up to $1,000 in
expense related to the Company’s commitment to fund the UFCW consolidated pension plan. The Company
may repay the Credit Agreement in whole or in part at any time without premium or penalty. The Credit
Agreement is not guaranteed by the Company’s subsidiaries.
In addition to the Credit Agreement, the Company maintained two uncommitted money market lines
totaling $75 in the aggregate. The money market lines allow the Company to borrow from banks at mutually
agreed upon rates, usually at rates below the rates offered under the credit agreement. As of February 2, 2013,
the Company had $1,645 of borrowings of commercial paper and no borrowings under its Credit Agreement
and money market lines.
As of February 2, 2013, the Company had outstanding letters of credit in the amount of $192, of which
$13 reduce funds available under the Company’s Credit Agreement. The letters of credit are maintained
primarily to support performance, payment, deposit or surety obligations of the Company.
Most of the Company’s outstanding public debt is subject to early redemption at varying times and
premiums, at the option of the Company. In addition, subject to certain conditions, some of the Company’s
publicly issued debt will be subject to redemption, in whole or in part, at the option of the holder upon the
occurrence of a redemption event, upon not less than five days’ notice prior to the date of redemption, at a
redemption price equal to the default amount, plus a specified premium. “Redemption Event” is defined in
the indentures as the occurrence of (i) any person or group, together with any affiliate thereof, beneficially
owning 50% or more of the voting power of the Company, (ii) any one person or group, or affiliate thereof,
succeeding in having a majority of its nominees elected to the Company’s Board of Directors, in each case,
without the consent of a majority of the continuing directors of the Company or (iii) both a change of control
and a below investment grade rating.