LensCrafters 2009 Annual Report Download - page 82

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> 80 | ANNUAL REPORT 2009
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 Club Deal Swaps expired 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 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 were highly
effective.
During the third quarter 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 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 US$ (12.8) million, net of
taxes, is included in other comprehensive income as of December 31, 2009. 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 2010 is approximately US$ (8.5) million, net
of taxes.
(d) Other loans consist of several small credit agreements.
(e) On November 14, 2007, the Group completed the merger with Oakley for a total purchase price of
approximately US$ 2.1 billion. In order to finance the acquisition of Oakley, on October 12, 2007 the
Company and US Holdings entered into two credit facilities with a group of banks providing for certain
term loans and a bridge loan for an aggregate principal amount of US$ 2.0 billion. The term loan facility
is a term loan of US$ 1.5 billion, with a five-year term, with options to extend the maturity on two occa-
sions for one year each time. The term loan facility is divided into two facilities, Facility D and Facility E.
Facility D consists of an amortizing term loan in an aggregate amount of US$ 1.0 billion, made available
to US Holdings, and Facility E consists of a bullet term loan in an aggregate amount of US$ 500 million,
made available to the Company. Each facility has a five-year term, with options to extend the maturity
date on two occasions for one year each time. Interest accrues on the term loan at LIBOR plus 20 to
40 basis points based on "Net Debt to EBITDA" ratio, as defined in the agreement (0.634 percent for
Facility D and 0.604 percent for Facility E on December 31, 2009). On September 2008, the Company
exercised an option included in the agreement to extend the maturity date of Facilities D and E to Oc-
tober 12, 2013. These credit facilities contain certain financial and operating covenants. The Company
was in compliance with those covenants as of December 31, 2009. US$ 1,450.0 million was borrowed
under this credit facility as of December 31, 2009.
During the third quarter of 2007, the Group entered into ten interest rate swap transactions with an
aggregate initial notional amount of US$ 500.0 million with various banks ("Tranche E Swaps"). These
swaps will expire on October 12, 2012. The Tranche E Swaps were entered into as a cash flow hedge
on Facility E of the credit facility discussed above. The Tranche E Swaps exchange the floating rate of
LIBOR for an average fixed rate of 4.26 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 US$ (21.8) million, net of
taxes, is included in other comprehensive income as of December 31, 2009. Based on current interest
rates and market conditions, the estimated aggregate amount to be recognized in earnings from other
comprehensive income for these cash flow hedges in fiscal 2010 is approximately US$ (13.3) million, net
of taxes.