LensCrafters 2011 Annual Report Download - page 229

| 153 >CONSOLIDATED FINANCIAL STATEMENTS - NOTES
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 occasions for one year each time. The term loan facility
is divided into two facilities, Facility D and Facility E. Facility D is a US$ 1.0 billion
amortizing term loan requiring repayments of US$ 50 million on a quarterly basis
starting from October 2009, 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. Interest accrues on the term loan at LIBOR plus 20 to 40 basis points
based on “Net Debt/EBITDA” ratio, as defined in the facility agreement (0.644 percent
for Facility D and 0.794 percent for Facility E on December 31, 2010). In September
2008, the Company exercised an option included in the agreement to extend the
maturity date of Facilities D and E to October 12, 2013. These credit facilities contain
certain financial and operating covenants. The Company was in compliance with those
covenants as of December 31, 2011. US$ 1.0 billion was borrowed under this credit
facility as of December 31, 2011.
During the third quarter of 2007, the Group entered into ten interest rate swap
transactions with an aggregate initial notional amount of US$ 500 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$ (9.8) million, net of taxes, is included in other comprehensive income
as of December 31, 2011. 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 year 2012 is approximately US$ (9.3) million,
net of taxes.
During the fourth quarter of 2008 and the first quarter of 2009, US Holdings entered
into 14 interest rate swap transactions with an aggregate initial notional amount of
US$ 700 million with various banks (“Tranche D Swaps”), which will start to decrease
by US$ 50 million every three months beginning on April 12, 2011. The final maturity
of these swaps will be October 12, 2012. The Tranche D Swaps were entered into as
a cash flow hedge on Facility D of the credit facility discussed above. The Tranche D
Swaps exchange the floating rate of LIBOR for an average fixed rate of 2.672 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 $(4.8) million, net of taxes, is included in other
comprehensive income as of December 31, 2011. Based on current interest rates and
market conditions, the estimated aggregate amount to be recognized in earnings
from other comprehensive income for these cash flow hedges in fiscal year 2012 is
approximately US$ (4.7) million, net of taxes.
The short-term bridge loan facility was for an aggregate principal amount of US$
500 million. Interest accrued on the short-term bridge loan at LIBOR (as defined in