Neiman Marcus 2009 Annual Report Download - page 42

Table of Contents
outstanding borrowings under that facility from excess cash flow, as defined, that we generated in fiscal years 2009 and 2010. We
expect to make an additional prepayment of $7.6 million in the first quarter of fiscal year 2011.
Financing Structure at July 31, 2010
Our major sources of funds are comprised of vendor financing, a $600.0 million Asset-Based Revolving Credit Facility,
$1,513.4 million Senior Secured Term Loan Facility (including $7.6 million of borrowings classified as current liabilities),
$752.4 million Senior Notes, $500.0 million Senior Subordinated Notes, $125.0 million 2028 Debentures and operating leases.
Senior Secured Asset-Based Revolving Credit Facility. NMG has an asset-based revolving credit facility with a committed
borrowing capacity of $600.0 million that matures on January 15, 2013. The facility also provides an uncommitted accordion feature
that allows NMG to request the lenders to provide additional capacity in either the form of increased revolving commitments or
incremental term loans, subject to a potential total maximum facility of $800 million.
Availability under the Asset-Based Revolving Credit Facility is subject to a borrowing base. The Asset-Based Revolving
Credit Facility includes borrowing capacity available for letters of credit and for borrowings on same-day notice. The borrowing base
for the Asset-Based Revolving Credit Facility is equal to at any time the sum of (a) the lesser of (i) 80% of eligible inventory (valued
at the lower of cost or market value) and (ii) 85% of the net orderly liquidation value of eligible inventory, and (b) 85% of the amounts
owed by credit card processors in respect of eligible credit card accounts constituting proceeds arising from the sale or disposition of
inventory, less certain reserves. Through April 30, 2011 NMG is required to maintain excess availability under the terms of the Asset-
Based Revolving Credit Facility of at least the greater of (a) 10% of the lesser of (i) the aggregate revolving commitments and (ii) the
borrowing base and (b) $50 million. After April 30, 2011, if at any time, excess availability is less than the greater of (a) 15% of the
lesser of (i) the aggregate revolving commitments and (ii) the borrowing base and (b) $60 million, NMG will be required to maintain a
pro forma ratio of consolidated EBITDA to consolidated Fixed Charges (as such terms are defined in the credit agreement) of at least
1.1 to 1.0. On July 31, 2010, NMG had no borrowings outstanding under this facility, $31.1 million of outstanding letters of credit
and $508.9 million of unused borrowing availability.
See Note 7 in the Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Asset-
Based Revolving Credit Facility.
Senior Secured Term Loan Facility. In October 2005, NMG entered into a credit agreement and related security and other
agreements for a $1,975.0 million Senior Secured Term Loan Facility. At July 31, 2010, the outstanding balance under the Senior
Secured Term Loan Facility was $1,513.4 million (including $7.6 million of borrowings classified as current liabilities). The principal
amount of the loans outstanding is due and payable in full on April 6, 2013.
At July 31, 2010, borrowings under the Senior Secured Term Loan Facility bore interest at a rate per annum equal to, at
NMG's option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse and (2) the federal
funds effective rate plus 1/2 of 1% or (b) a LIBOR rate, subject to certain adjustments, in each case plus an applicable margin. The
interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 2.47% at July 31, 2010. The
applicable margin is subject to adjustment based on contractually defined debt coverage ratios. At July 31, 2010, the applicable
margin with respect to base rate borrowings was 1.00% and the applicable margin with respect to LIBOR borrowings was 2.00%.
The credit agreement governing the Senior Secured Term Loan Facility requires NMG to prepay outstanding term loans with
50% (which percentage will be reduced to 25% if NMG's total leverage ratio is less than a specified ratio and will be reduced to 0% if
NMG's total leverage ratio is less than a specified ratio) of its annual excess cash flow (as defined in the credit agreement). For fiscal
year 2010, NMG was required to prepay $92.6 million of our outstanding term loans pursuant to the annual excess cash flow
requirements. Of such amount, NMG paid $85.0 million in the fourth quarter of fiscal year 2010 and will make the remaining $7.6
million payment in the first quarter of fiscal year 2011. For fiscal year 2009, NMG was required to prepay $26.6 million of
outstanding term loans in the first quarter of fiscal year 2010 pursuant to the annual excess cash flow requirements.
See Note 7 in the Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior
Secured Term Loan Facility.
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