Neiman Marcus 2010 Annual Report Download - page 41

Table of Contents
Financing Structure at July 30, 2011
Our major sources of funds are comprised of vendor financing, a $700.0 million Asset-Based Revolving Credit Facility,
$2,060.0 million Senior Secured Term Loan Facility, $500.0 million Senior Subordinated Notes, $125.0 million 2028 Debentures and
operating leases.
Senior Secured Asset-Based Revolving Credit Facility. In May 2011, NMG entered into an amendment and restatement of
the Asset-Based Revolving Credit Facility. As amended, the maximum committed borrowing capacity under the Asset-Based
Revolving Credit Facility is $700.0 million and the Asset-Based Revolving Credit Facility matures on May 17, 2016 (or, if earlier, the
date that is 45 days prior to the scheduled maturity of NMG's Senior Secured Term Loan Facility or Senior Subordinated Notes, or any
indebtedness refinancing them, unless refinanced as of that date). The Asset-Based Revolving Credit 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 $1,000.0 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
is equal to at any time the sum of (a) 90% of the net orderly liquidation value of eligible inventory, net of certain reserves, plus
(b) 85% of the amounts owed by credit card processors in respect of eligible credit card accounts constituting proceeds from the sale
or disposition of inventory, less certain reserves. Excess availability provisions were revised to provide that NMG must at all times
maintain excess availability of at least the greater of (a) 10% of the lesser of 1) the aggregate revolving commitments and 2) the
borrowing base and (b) $50 million, but NMG is not required to maintain a fixed charge coverage ratio.
On July 30, 2011, NMG had no borrowings outstanding under this facility, $13.7 million of outstanding letters of credit and
$615.8 million of unused borrowing availability. NMG is required to pay interest on borrowings pursuant to a specified formula, as
well as a commitment fee in respect to unused commitments, as set forth in Note 6 of the Notes to Consolidated Financial Statements
in Item 15, which contains 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. In May 2011, NMG entered into an amendment and
restatement (the TLF Amendment) of the Senior Secured Term Loan Facility. The TLF Amendment increased the amount of
borrowings to $2,060.0 million and extended the maturity of the loans to May 16, 2018. Loans that were not extended under the TLF
Amendment were refinanced. The proceeds of the incremental borrowings under the term loan facility, along with cash on hand, were
used to repurchase or redeem the $752.4 million principal amount outstanding of Senior Notes. The TLF Amendment also provided
for an uncommitted incremental facility to request lenders to provide additional term loans, upon certain conditions, including that
NMG's secured leverage ratio (as defined in the TLF Amendment) is less than or equal to 4.50 to 1.00 on a pro forma basis after
giving effect to the incremental loans and the use of proceeds thereof. At July 30, 2011, the outstanding balance under the Senior
Secured Term Loan Facility was $2,060.0 million. The principal amount of the loans outstanding is due and payable in full on
May 16, 2018.
At July 30, 2011, 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 AG (the administrative
agent), 2) the federal funds effective rate plus 1¤2 of 1.00% and 3) the adjusted one-month LIBOR rate plus 1.00% or (b) an adjusted
LIBOR rate (for a period equal to the relevant interest period, and in any event, never less than 1.25%), subject to certain adjustments,
in each case plus an applicable margin. In addition to extending the maturity of a portion of the existing term loans under the Senior
Secured Term Loan Facility, the TLF Amendment changed the "applicable margin" used in calculating the interest rate under the term
loans. The interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 4.75% at July 30,
2011. The applicable margin with respect to base rate borrowings is 2.50% and the applicable margin with respect to LIBOR
borrowings is 3.50%.
See Note 6 of the Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior
Secured Term Loan Facility.
2028 Debentures. NMG has outstanding $125.0 million aggregate principal amount of its 7.125% 2028 Debentures. NMG's
2028 Debentures mature on June 1, 2028.
See Note 6 of the Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the 2028
Debentures.
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