Neiman Marcus 2014 Annual Report Download - page 23

Table of Contents
If we cannot make scheduled payments on our debt, we will be in default and holders of the Notes and the lenders under our Senior Secured Credit
Facilities could declare all outstanding principal and interest to be due and payable, the lenders under our Senior Secured Credit Facilities could terminate
their commitments to loan additional money to us and we could be forced into bankruptcy or liquidation.
The occurrence of any of the foregoing would materially and adversely affect our business, financial position and results of operations.
Our debt agreements contain restrictions that may limit our flexibility in operating our business.
The indentures governing the Notes and the credit agreements governing our Senior Secured Credit Facilities contain, and any agreements
governing future indebtedness will likely contain, a number of restrictive covenants that impose significant operating and financial restrictions, including
restrictions on our ability to engage in acts that may be in our long-term best interest, including restrictions on our and our subsidiaries' ability to:
• incur additional indebtedness and guarantee indebtedness;
• create liens;
• make investments, loans or advances;
• merge or consolidate;
• sell assets, including capital stock of subsidiaries or make acquisitions;
• pay dividends or make other distributions in respect of, or repurchase or redeem, capital stock;
• prepay, redeem or repurchase certain indebtedness;
• enter into transactions with affiliates; and
• alter our lines of business.
In addition, the springing financial covenant in the credit agreement governing our Asset-Based Revolving Credit Facility requires the maintenance
of a minimum fixed charge coverage ratio, which covenant is triggered when excess availability under our Asset-Based Revolving Credit Facility is less than
the greater of $50.0 million and 10% of the Line Cap (as defined in the credit agreement governing the Asset-Based Revolving Credit Facility) then in effect.
Our ability to meet the financial covenant could be affected by events beyond our control.
A breach of the covenants under the indentures governing the Notes or under the credit agreements governing our Senior Secured Credit Facilities
could result in an event of default under the applicable debt document. Such a default, if not cured or waived, may allow the creditors to accelerate the
related debt and may result in the acceleration of any other debt that is subject to an applicable cross-acceleration or cross-default provision. In addition, an
event of default under the credit agreements governing our Senior Secured Credit Facilities would permit the lenders under our Senior Secured Credit
Facilities to terminate all commitments to extend further credit under the facilities. Furthermore, if we were unable to repay the amounts due and payable
under our Senior Secured Credit Facilities, those lenders could proceed against the collateral granted to them to secure that indebtedness. If our lenders or
holders of the Notes accelerate the repayment of our borrowings, we and our subsidiaries may not have sufficient assets to repay that indebtedness.
Based on the foregoing factors, the operating and financial restrictions and covenants in our current debt agreements and any future financing
agreements could adversely affect our ability to finance future operations or capital needs or to engage in other business activities.
Our ability to obtain adequate financing or raise capital in the future may be limited.
Our business and operations may consume resources faster than we anticipate. To support our operating strategy, we must have sufficient capital to
continue to make significant investments in our new and existing stores, online operations and advertising. While some of these investments can be financed
with borrowings under our Asset-Based Revolving Credit Facility, the amount of such borrowings is limited to a periodic borrowing base valuation of our
accounts receivable and domestic inventory and is therefore potentially subject to significant fluctuations, as well as certain discretionary rights of the
administrative agent of our Asset-Based Revolving Credit Facility in respect of the calculation of such borrowing base value.
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