Neiman Marcus 2010 Annual Report Download - page 116

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• a first-priority pledge of 100% of NMG's capital stock and certain of the capital stock held by NMG, the Company or
any subsidiary guarantor (which pledge, in the case of any foreign subsidiary is limited to 100% of the non-voting stock
(if any) and 65% of the voting stock of such foreign subsidiary); and
• a first-priority security interest in, and mortgages on, substantially all other tangible and intangible assets of NMG, the
Company and each subsidiary guarantor, including a significant portion of NMG's owned and leased real property
(which currently consists of approximately half of NMG's full-line retail stores) and equipment, but excluding, among
other things, the collateral described in the following bullet point; and
• a second-priority security interest in personal property consisting of inventory and related accounts, cash, deposit
accounts, all payments received by NMG or the subsidiary guarantors from credit card clearinghouses and processors or
otherwise in respect of all credit card charges for sales of inventory by NMG and the subsidiary guarantors, certain
related assets and proceeds of the foregoing.
Capital stock and other securities of a subsidiary of NMG that are owned by NMG or any subsidiary guarantor will not
constitute collateral under NMG's Senior Secured Term Loan Facility to the extent that such securities cannot secure the 2028
Debentures or other secured public debt obligations without requiring the preparation and filing of separate financial statements of
such subsidiary in accordance with applicable SEC rules. As a result, the collateral under NMG's Senior Secured Term Loan Facility
will include shares of capital stock or other securities of subsidiaries of NMG or any subsidiary guarantor only to the extent that the
applicable value of such securities (on a subsidiary-by-subsidiary basis) is less than 20% of the aggregate principal amount of the 2028
Debentures or other secured public debt obligations of NMG.
The credit agreement governing the Senior Secured Term Loan Facility contains a number of negative covenants that are
substantially similar to those governing the Senior Subordinated Notes and additional covenants related to the security arrangements
for the Senior Secured Term Loan Facility. The credit agreement also contains customary affirmative covenants and events of default,
including a cross-default provision in respect of any other indebtedness that has an aggregate principal amount exceeding $50 million.
The fair value of the Senior Secured Term Loan Facility was approximately $2,018.8 million at July 30, 2011 and $1,426.4
million at July 31, 2010 based on prevailing market rates (Level 2).
2028 Debentures. NMG has outstanding $125.0 million aggregate principal amount of its 7.125% 2028 Debentures. NMG
equally and ratably secures its 2028 Debentures by a first lien security interest on certain collateral subject to liens granted under
NMG's Senior Secured Credit Facilities constituting (a) (i) 100% of the capital stock of certain of NMG's existing and future domestic
subsidiaries, and (ii) 100% of the non-voting stock and 65% of the voting stock of certain of NMG's existing and future foreign
subsidiaries and (b) certain of NMG's principal properties that include approximately half of NMG's full-line stores, in each case, to
the extent required by the terms of the indenture governing the 2028 Debentures. The 2028 Debentures contain covenants that restrict
NMG's ability to create liens and enter into sale and lease back transactions. The collateral securing the 2028 Debentures will be
released upon the release of liens on such collateral under NMG's Senior Secured Credit Facilities and any other debt (other than the
2028 Debentures) secured by such collateral. Capital stock and other securities of a subsidiary of NMG that are owned by NMG or
any subsidiary will not constitute collateral under the 2028 Debentures to the extent such property does not constitute collateral under
NMG's Senior Secured Credit Facilities as described above. The 2028 Debentures are guaranteed on an unsecured, senior basis by the
Company. The guarantee by the Company is full and unconditional and joint and several. Currently, the Company's non-guarantor
subsidiaries consist principally of Bergdorf Goodman, Inc. through which NMG conducts the operations of its Bergdorf Goodman
stores and NM Nevada Trust which holds legal title to certain real property and intangible assets used by NMG in conducting its
operations. The 2028 Debentures include a cross-acceleration provision in respect of any other indebtedness that has an aggregate
principal amount exceeding $15 million. NMG's 2028 Debentures mature on June 1, 2028.
The fair value of the 2028 Debentures was approximately $117.5 million at July 30, 2011 and $114.1 million at July 31, 2010
based on quoted market prices (Level 2).
Senior Notes.In May 2011, NMG repurchased and cancelled $689.2 million principal amount of the Senior Notes through a
tender offer and redeemed the remaining $63.2 million principal amount of notes on June 15, 2011 (after which no Senior Notes
remained outstanding). NMG's payments to holders of the Senior Notes in the tender offer and redemption, taken together, aggregated
approximately $790 million.
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