Neiman Marcus 2005 Annual Report Download - page 107

Subordinated Notes are structurally subordinated to all existing and future liabilities, including trade payables, of NMG's subsidiaries that
are not providing guarantees.
The Company is not required to make any mandatory redemption or sinking fund payments with respect to the Senior
Subordinated Notes, but, under certain circumstances, NMG may be required to offer to purchase Senior Subordinated Notes as described
below. The Company may from time to time acquire Senior Subordinated Notes by means other than a redemption, whether by tender
offer, in open market purchases, through negotiated transactions or otherwise, in accordance with applicable securities laws.
Except as described below, the Senior Subordinated Notes are not redeemable at NMG's option prior to October 15, 2010. From
and after October 15, 2010, NMG may redeem the Senior Subordinated Notes, in whole or in part, at a redemption price equal to
105.188% of principal amount, declining annually to 100% of principal amount on October 15, 2013, plus accrued and unpaid interest,
and Additional Interest (as defined in the Senior Subordinated Indenture), if any, thereon to the applicable redemption date.
Prior to October 15, 2008, NMG may, at its option, subject to certain conditions, redeem up to 35% of the original aggregate
principal amount of Senior Subordinated Notes at a redemption price equal to 110.375% of the aggregate principal amount thereof, plus
accrued and unpaid interest, and Additional Interest, if any, thereon to the redemption date, with the net cash proceeds of one or more
equity offerings of NMG or any direct or indirect parent of NMG to the extent such net proceeds are contributed to NMG.
At any time prior to October 15, 2010, NMG also may redeem all or a part of the Senior Subordinated Notes at a redemption
price equal to 100% of the principal amount of Senior Subordinated Notes redeemed plus an applicable premium, as provided in the
Senior Subordinated Indenture, and accrued and unpaid interest and Additional Interest, if any, to the redemption date.
Upon the occurrence of a change of control (as defined in the Senior Subordinated Indenture), NMG will make an offer to
purchase all of the Senior Subordinated Notes at a price in cash equal to 101% of the aggregate principal amount thereof plus accrued and
unpaid interest, and Additional Interest, if any, to the date of purchase.
The indenture governing the Senior Subordinated Notes contains covenants substantially similar to those applicable to NMG's
Senior Notes described above. The Senior Subordinated Indenture also provides for events of default, which, if any of them occurs, would
permit or require the principal, premium, if any, interest and any other monetary obligations on all outstanding Senior Notes to be due and
payable immediately, subject to certain exceptions.
The fair value of NMG's Senior Subordinated Notes at July 29, 2006 was approximately $531.3 million.
Redemption of 2008 Notes. In May 1998, NMG issued $125.0 million aggregate principal amount of its 2008 Notes. Upon
closing of the Transactions, NMG called its 2008 Notes for redemption pursuant to their terms. On November 7, 2005, NMG used
$134.7 million of reserved cash to redeem its 2008 Notes, which included a call premium of $6.2 million plus accrued interest of
$3.5 million through the redemption date.
Maturities of Long-Term Debt. At July 29, 2006, annual maturities of long-term debt during the next five fiscal years and
thereafter are as follows (in millions):
2007 $ —
2008 —
2009 —
2010 —
2011 —
Thereafter 3,195.7
The above table does not reflect future excess cash flow prepayments, if any, that may be required under the term loan facility.
Interest Rate Swaps. The Company uses derivative financial instruments to help manage its interest rate risk. Effective
December 6, 2005, NMG entered into floating to fixed interest rate swap agreements for an aggregate notional amount of
$1,000.0 million to limit its exposure to interest rate increases related to a portion of its floating rate indebtedness. The interest rate swap
agreements terminate after five years. As of the effective date, NMG designated the interest rate swaps as cash flow
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