LensCrafters 2008 Annual Report Download - page 81

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amounts of Series A, Series B and Series C Notes are US$ 20 million, US$ 127 million and US$ 128
million, respectively. Series A Notes mature on July 1, 2013, Series B Notes mature on July 1, 2015 and
Series C Notes mature on July 1, 2018. Interest on the Series A Notes accrues at 5.96 percent per
annum, interest on the Series B Notes accrues at 6.42 percent per annum and interest on the Series C
Notes accrues at 6.77 percent per annum. The proceeds from the 2008 Notes received on July 1, 2008,
were used to repay a portion of the Bridge Loan Facility which was amended on July 1, 2008. In
addition, US Holdings extended the amended Bridge Loan (see (e) below) of US$ 150 million for a
further 18 months starting from July 1, 2008.
(c) On June 3, 2004, as amended on March 10, 2006, the Company and US Holdings entered into a credit
facility with a group of banks providing for loans in the aggregate principal amount of Euro 1,130 million
and US$ 325 million. The five-year facility consists of three Tranches (Tranche A, Tranche B, Tranche C).
The March 2006 amendment increased the available borrowings, decreased the interest margin and
defined a new maturity date of five years from the date of the amendment for Tranche B and Tranche
C. On February 2007, the Company exercised an option included in the amendment to the term and
revolving facility to extend the maturity date of Tranches B and C to March 2012. On February2008, the
Company exercised an option included in the amendment to the term and revolving facility to extend
the maturity date of Tranches B and C to March 2013. Tranche A is a Euro 405 million amortizing term
loan requiring repayment of nine equal quarterly installments of principal of Euro 45 million beginning
in June 2007, which is to be used for general corporate purposes, including the refinancing of existing
Luxottica Group S.p.A. debt as it matures. Tranche B is a term loan of US$ 325 million which was drawn
upon on October 1, 2004 by US Holdings to finance the purchase price of the acquisition of Cole.
Amounts borrowed under Tranche B will mature in March 2013. Tranche C is a Revolving Credit Facility
of Euro 725 million-equivalent multi-currency (Euro/US Dollar). Amounts borrowed under Tranche C
may be repaid and reborrowed with all outstanding balances maturing in March 2013. The Company
can select interest periods of one, two, three or six months with interest accruing on Euro-denominated
loans based on the corresponding Euribor rate and US Dollar denominated loans based on the
corresponding LIBOR rate, both plus a margin between 0.20 percent and 0.40 percent based on the
“ Net Debt/EBITDA” ratio, as defined in the agreement. The interest rate on December 31, 2008 was
4.166 percent for Tranche A, 4.874 percent for Tranche B, 1.189 percent on Tranche C amounts
borrowed in US Dollars and 3.397 percent on Tranche C borrowed in Euro. The credit facility contains
certain financial and operating covenants. The Company was in compliance with those covenants as of
December 31, 2008. Under this credit facility, Euro 1,001.4 million and Euro 1,059.9 million was
borrowed as of December 31, 2008 and 2007, respectively.
In June 2005, the Company entered into nine interest rate swap transactions with an aggregate initial
notional amount of Euro 405 million with various banks which will decrease by Euro 45 million every
three months starting on June 3, 2007 (the “ Club Deal Swaps” ). These swaps will expire on June 3, 2009.
The Club Deal Swaps were entered into as a cash flow hedge on Tranche A of the credit facility
discussed above. The Club Deal Swaps exchange the floating rate of Euribor for an average fixed rate
of 2.565. percent per annum. The ineffectiveness of cash flow hedges was tested at the inception date
and at least every three months. The results of the tests indicated that the cash flow hedges are highly
effective. As a consequence approximately Euro 0.17 million, net of taxes, is included in other
comprehensive income as of December 31, 2008. Based on current interest rates and market
conditions, the estimated aggregate amount to be recognized as earnings from other comprehensive
income for these cash flow hedges in fiscal 2009 is approximately Euro 0.07 million, net of taxes.
During the thirdquarter of 2007 the Group entered into 13 interest rate swap transactions with an
aggregate initial notional amount of US$ 325.0 million with various banks (“ Tranche B Swaps” ). These
swaps will expire on March 10, 2012. The Tranche B Swaps were entered into as a cash flow hedge on
Tranche B of the credit facility discussed above. The Tranche B Swaps exchange the floating rate of Libor
for an average fixed rate of 4.616 percent per annum. The ineffectiveness of cash flow hedges was tested
NOTES TO CONSOLIDATED
FINANCIAL STATEMENTS |79<