Neiman Marcus 2009 Annual Report Download - page 43

Table of Contents
2028 Debentures. In May 1998, NMG issued $125.0 million aggregate principal amount of its 7.125% 2028 Debentures.
NMG's 2028 Debentures mature on June 1, 2028.
See Note 7 in the Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the 2028
Debentures.
Senior Notes. NMG has $752.4 million aggregate principal amount of 9.0% / 9.75% Senior Notes under a senior indenture
(Senior Indenture). NMG's Senior Notes mature on October 15, 2015. We negotiated for the right to include the PIK feature in our
Senior Notes because of our belief that this feature could be a useful tool to enhance liquidity under appropriate circumstances. In the
second quarter of fiscal year 2009, given the dislocation in the financial markets and the uncertainty as to when reasonable conditions
would return, we believed that it was appropriate to utilize this feature, even though we had unused borrowing capacity under our
$600.0 million revolving credit facility. Accordingly, we elected to pay non-cash interest for the three quarterly interest periods
ending on October 14, 2009 and to make such interest payments with the issuance of additional Senior Notes at the non-cash interest
rate of 9.75% instead of paying interest in cash. As a result, the original principal amount of Senior Notes of $700.0 million increased
by $17.1 million in April 2009, $17.4 million in July 2009 and $17.9 million in October 2009. We have elected to pay cash interest
since the first quarter of fiscal year 2010. After October 15, 2010, we are required to make all interest payments on the Senior Notes
entirely in cash.
See Note 7 in the Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior
Notes.
Senior Subordinated Notes. NMG has $500.0 million aggregate principal amount of 10.375% Senior Subordinated Notes
under a senior subordinated indenture (Senior Subordinated Indenture). NMG's Senior Subordinated Notes mature on October 15,
2015.
See Note 7 in the Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior
Subordinated Notes.
Interest Rate Swaps. In connection with the Acquisition, we obtained $2,575.0 million of floating rate debt agreements, of
which $2,125.0 million was outstanding at the Acquisition date and $1,513.4 million (including $7.6 million of borrowings classified
as current liabilities) is outstanding at July 31, 2010. Effective December 2005, NMG entered into floating to fixed interest rate swap
agreements for an aggregate notional amount of $1,000.0 million to limit our exposure to interest rate increases related to a portion of
our floating rate indebtedness. These swap agreements hedge a portion of our contractual floating rate interest commitments through
the expiration of the agreements in December 2010. As a result of the swap agreements, NMG's effective fixed interest rates as to the
$1,000.0 million in floating rate indebtedness will currently range from 6.963% to 6.983% per quarter through December 2010 and
result in an average fixed rate of 6.973%. The interest rate swaps expire in December 2010.
Interest Rate Caps. Effective January 2010, NMG entered into interest rate cap agreements for an aggregate notional amount
of $500.0 million in order to hedge the variability of our cash flows related to a portion of our floating rate indebtedness once the
interest rate swap expires on December 2010. The interest rate cap agreements commence in December 2010 and expire in
December 2012. Pursuant to the interest rate cap agreements, NMG has capped LIBOR at 2.50% through December 2012 with
respect to the $500.0 million notional amount of such agreements. In the event LIBOR is less than 2.50%, NMG will pay interest at
the lower LIBOR rate. In the event LIBOR is higher than 2.50%, NMG will pay interest at the capped rate of 2.50%.
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