Neiman Marcus 2014 Annual Report Download - page 126

Table of Contents
Revolving Credit Facility, and the guarantees of those obligations, are secured, subject to certain significant exceptions, by substantially all of the assets of
Holdings, the Company and the subsidiary guarantors, including:
• a first-priority security interest in personal property consisting of inventory and related accounts, cash, deposit accounts, all payments received
by the Company or the subsidiary guarantors from credit card clearinghouses and processors or otherwise in respect of all credit card charges for
sales of inventory by the Company and the subsidiary guarantors, certain related assets and proceeds of the foregoing;
• a second-priority pledge of 100% of the Company’s capital stock and certain of the capital stock held by Holdings, 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 second-priority security interest in, and mortgages on, substantially all other tangible and intangible assets of Holdings, the Company and
each subsidiary guarantor, including a significant portion of the Company’s owned real property and equipment.
Capital stock and other securities of a subsidiary of the Company that are owned by the Company or any subsidiary guarantor will not constitute
collateral under the Asset-Based Revolving Credit 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 the Asset-Based Revolving Credit Facility will include shares of capital stock or other securities of subsidiaries of the Company 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 the Company.
The Asset-Based Revolving Credit Facility contains covenants limiting, among other things, dividends and other restricted payments, investments,
loans, advances and acquisitions, and prepayments or redemptions of other indebtedness. These covenants permit such restricted actions in an unlimited
amount, subject to the satisfaction of certain payment conditions, principally that we must have (x) pro forma excess availability under the Asset-Based
Revolving Credit Facility for each day of the 30-day period prior to such actions, which exceeds the greater of $90.0 million or 15% of the lesser of (a) the
revolving commitments under the Asset-Based Revolving Credit Facility and (b) the borrowing base and (y) a pro forma fixed charge coverage ratio of at
least 1.0 to 1.0, unless pro forma excess availability for each day of the 30-day period prior to such actions under the Asset-Based Revolving Credit Facility
would exceed the greater of (1) $200.0 million and (2) 25% of the lesser of (i) the aggregate revolving commitments under the Asset-Based Revolving Credit
Facility and (ii) the borrowing base. The Asset-Based Revolving Credit Facility 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 $50.0 million.
Senior Secured Term Loan Facility. On October 25, 2013, Neiman Marcus Group LTD LLC entered into a credit agreement and related security and
other agreements for the $2,950.0 million Senior Secured Term Loan Facility. At August 1, 2015 (after giving effect to the Refinancing Amendment
described below), the outstanding balance under the Senior Secured Term Loan Facility was $2,898.5 million. The principal amount of the loans outstanding
is due and payable in full on October 25, 2020.
The Senior Secured Term Loan Facility permits us to increase the term loans or add a separate tranche of term loans by an amount not to exceed
$650.0 million plus an unlimited amount that would result (a) in the case of any incremental term loan facility to be secured equally and ratably with the term
loans, a senior secured first lien net leverage ratio equal to or less than 4.25 to 1.00, and (b) in the case of any incremental term loan facility to be secured on a
junior basis to the term loans, to be subordinated in right of payment to the term loans or unsecured and pari passu in right of payment with the term loans, a
total net leverage ratio equal to or less than the total net leverage ratio as of October 25, 2013.
On March 13, 2014, we entered into a refinancing amendment with respect to the Senior Secured Term Loan Facility (the Refinancing Amendment).
The Refinancing Amendment provided for an immediate reduction in the interest rate margin applicable to the loans outstanding under the Senior Secured
Term Loan Facility from (a) 4.00% to 3.25% for LIBOR borrowings and (b) 3.00% to 2.25% for base rate borrowings. In addition, the interest rate margin in
the event of a step down based on our senior secured first lien net leverage, as defined in the credit agreement governing the Senior Secured Term Loan
Facility, was reduced from (1) 3.75% to 3.00% for LIBOR borrowings and (2) 2.75% to 2.00% for base rate borrowings. Substantially all other terms are
consistent with the credit agreement governing the Senior Secured Term Loan Facility as of October 25, 2013, including the amortization schedule and
maturity dates. In connection with the Refinancing Amendment, we incurred costs of $29.5 million, which were capitalized as debt issuance costs (included
in other assets). In addition, we incurred a loss on debt extinguishment of $7.9 million, which primarily consisted of the write-off of debt issuance costs,
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