Neiman Marcus 2014 Annual Report Download - page 24

Table of Contents
Since availability under our Asset-Based Revolving Credit Facility and/or cash generated by our operations may not be sufficient to allow us to
fund our capital requirements in the future, we may need to raise additional funds through credit, the issuance of new equity or debt securities or a
combination of both. Additional financing may not be available on favorable terms or at all.
In addition, the credit and securities markets and the financial services industry have recently experienced disruption characterized by the
bankruptcy, failure, collapse or sale of various financial institutions, increased volatility in securities prices, diminished liquidity and credit availability and
intervention from the U.S. and other governments. The cost and availability of credit has been and may continue to be adversely affected by these conditions.
We cannot be certain that funding for our capital needs will be available from our existing financial institutions and the credit and securities markets if
needed, and if available, to the extent required, and on acceptable terms.
The Asset-Based Revolving Credit Facility matures on October 25, 2018, the senior secured term loan facility (as amended, the Senior Secured Term
Loan Facility and, together with the Asset-Based Revolving Credit Facility, the Senior Secured Credit Facilities) matures on October 25, 2020, the 8.00%
senior cash pay notes due 2021 (the Cash Pay Notes) and the 8.75%/9.50% senior PIK toggle notes due 2021 (the PIK Toggle Notes) mature on October 15,
2021, and the 7.125% senior debentures due 2028 (the 2028 Debentures and, collectively with the Cash Pay Notes and the PIK Toggle Notes, the Notes)
mature on June 1, 2028. If we cannot renew or refinance the foregoing indebtedness upon their respective maturities or, more generally, obtain funding when
needed, in each case on acceptable terms, we may be unable to continue to fund our capital requirements, which may have an adverse effect on our business,
financial condition and results of operations.
We are a holding company with no operations and may not have access to sufficient cash to make payments on our outstanding indebtedness.
We are a holding company and do not have any direct operations. Our only significant assets are the equity interests we directly and indirectly hold
in our subsidiaries. As a result, we are dependent upon dividends and other payments from our subsidiaries to generate the funds necessary to meet our
outstanding debt service and other obligations. Our subsidiaries may not generate sufficient cash from operations to enable us to make principal and interest
payments on our indebtedness. In addition, our subsidiaries are separate and distinct legal entities and, except for our existing and future subsidiaries that
will be the guarantors of our indebtedness, any payments on dividends, distributions, loans or advances to us by our subsidiaries could be subject to legal
and contractual restrictions on dividends. In addition, payments to us by our subsidiaries will be contingent upon our subsidiaries’ earnings. Additionally,
we may be limited in our ability to cause any future joint ventures to distribute their earnings to us. Subject to certain qualifications, our subsidiaries are
permitted under the terms of our indebtedness to incur additional indebtedness that may restrict payments from those subsidiaries to us. There can be no
assurance that agreements governing the current and future indebtedness of our subsidiaries will permit those subsidiaries to provide us with sufficient cash
to fund payments of principal, premiums, if any, and interest on our indebtedness when due. In the event that we do not receive distributions or other
payments from our subsidiaries, we may be unable to make required payments on our debt.
Despite our level of indebtedness, we and our subsidiaries may still incur substantially more debt. This could further exacerbate the risks to our financial
condition described above.
We and our subsidiaries may incur significant additional indebtedness in the future. Although the indentures governing the Notes and the credit
agreements governing our Senior Secured Credit Facilities contain restrictions on the incurrence of additional indebtedness, these restrictions are subject to a
number of qualifications and exceptions, and the additional indebtedness incurred in compliance with these restrictions could be substantial. As of August 1,
2015, our Asset-Based Revolving Credit Facility provides for borrowings of the lesser of unused commitments of $680.0 million, subject to a borrowing
base. Additionally, (i) our Senior Secured Term Loan Facility may be increased by an amount equal to (x) $650.0 million plus (y) an unlimited amount so
long as, in the case of new indebtedness secured on a pari passu basis with our Senior Secured Term Loan Facility, on a pro forma basis our maximum senior
secured first lien net leverage ratio, as defined in the credit agreement governing the Senior Secured Term Loan Facility, does not exceed 4.25 to 1.00, and in
the case of new indebtedness secured on a junior basis to our Senior Secured Term Loan Facility, subordinated in right of payment to our Senior Secured
Term Loan Facility or, in the case of certain incremental equivalent loan debt, unsecured and pari passu in right of payment with our Senior Secured Term
Loan Facility, on a pro forma basis our maximum total net leverage ratio, as defined in the credit agreement governing the Senior Secured Term Loan
Facility, does not exceed 7.00 to 1.00, in each case subject to certain conditions, and (ii) our Asset-Based Revolving Credit Facility can be increased by up to
$300.0 million. If new debt is added to our current debt levels, the related risks that we and the guarantors now face would increase. See Item 7,
“Management’s Discussion and Analysis of Financial Condition and Results of Operations.”
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