Nordstrom 2009 Annual Report Download - page 57

Nordstrom, Inc. and subsidiaries 49
Nordstrom, Inc.
Notes to Consolidated Financial Statements
Dollar and share amounts in millions except per share, per option and unit amounts
Interest Expense
The components of interest expense, net are as follows:
Fiscal year 2009 2008 2007
Interest expense on long-term debt and short-term
borrowings $148 $145 $102
Less:
Interest income (3) (3) (16)
Capitalized interest (7) (11) (12)
Interest expense, net $138 $131 $74
Credit Facilities
As of January 30, 2010, we had total short-term borrowing capacity available for general corporate purposes of $950. Of the total capacity, we had
$650 under our commercial paper program, which is backed by our unsecured revolving credit facility and $300 under our Variable Funding Note
facility (“2007-A VFN”).
During 2009, we entered into a new unsecured revolving credit facility (the “revolver”) with a capacity of $650. This revolver replaced our previously
existing $650 unsecured line of credit, which was scheduled to expire in November 2010. The revolver, which expires in August 2012, is available for
working capital, capital expenditures and general corporate purposes. Under the terms of the agreement, we pay a variable rate of interest and a
facility fee based on our debt rating. Consistent with our previous unsecured revolving credit facility, the new revolver requires that we maintain a
leverage ratio of not greater than four times Adjusted Debt to EBITDAR. The revolver also requires that we maintain a fixed charge coverage ratio of
at least two times, defined as:
EBITDAR less gross capital expenditures
Interest expense, net + rent expense
As of January 30, 2010 and January 31, 2009 we were in compliance with these covenants.
Under the revolver we have the option to increase the revolving commitment by up to $100, to a total of $750, provided that we obtain written
consent from the lenders who choose to increase their commitment.
Our $650 commercial paper program allows us to use the proceeds to fund share repurchases as well as operating cash requirements. Under the
terms of the commercial paper agreement, we pay a rate of interest based on, among other factors, the maturity of the issuance and market
conditions. The issuance of commercial paper has the effect, while it is outstanding, of reducing borrowing capacity under our revolver by an
amount equal to the principal amount of commercial paper. As of January 30, 2010 we had no outstanding issuances under our $650 commercial
paper program and no outstanding borrowings under our revolver. As of January 31, 2009, we had $275 in outstanding issuances under our $650
commercial paper program and no outstanding borrowings under our revolver.
During 2009, we renewed our 2007-A VFN. The 2007-A VFN has a capacity of $300 and matures in January 2011. The 2007-A VFN is backed by
substantially all of the Nordstrom private label card receivables and a 90% interest in the co-branded Nordstrom VISA credit card receivables.
Borrowings under the 2007-A VFN incur interest based upon the cost of commercial paper issued by a third-party bank conduit plus specified fees.
We pay a commitment fee for the notes based on the size of the commitment. At the end of 2009 and 2008, we had no outstanding issuances against
this facility.
Our wholly owned federal savings bank, Nordstrom fsb, also maintains a variable funding facility with a short-term credit capacity of $100. This
facility is backed by the remaining 10% interest in the Nordstrom VISA credit card receivables and is available, if needed, to provide liquidity support
to Nordstrom fsb. At the end of 2009 and 2008, Nordstrom fsb had no outstanding borrowings under this facility. Borrowings under the facility incur
interest based upon the cost of commercial paper issued by the third-party bank conduit plus specified fees.