Nordstrom 2010 Annual Report Download - page 39

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Nordstrom, Inc. and subsidiaries 31
Impact of Credit Ratings
Under the terms of our $650 revolver, any borrowings we may incur will accrue interest at a floating base rate tied to either:
(i) LIBOR or
(ii) the higher of:
a. the federal funds rate plus 50 basis points or
b. the prime rate.
The rate depends upon the type of borrowing incurred, plus in each case an applicable margin. This applicable margin varies depending upon the credit
ratings assigned to our long-term unsecured debt. At the time of this report, our long-term unsecured debt ratings, outlook and resulting applicable
margin were as follows:
Credit
ratings Outlook
Moody’s Baa1 Stable
Standard & Poor’s A- Stable
Base interest
rate
Applicable
margin
LIBOR 1.750%
All other 0.750%
Should the ratings assigned to our long-term unsecured debt improve, the applicable margin associated with our borrowings may decrease, resulting
in a slightly lower cost of capital under this facility. Should the ratings assigned to our long-term unsecured debt worsen, the applicable margin
associated with our borrowings may increase, resulting in a slightly higher cost of capital under this facility.
Debt Covenants
The revolver requires that we maintain a fixed charge coverage ratio of at least two times, and a leverage ratio of not greater than four times.
The fixed coverage ratio is defined as:
Earnings before Interest, Income Taxes, Depreciation, Amortization and Rent (“EBITDAR”) less gross capital expenditures
Interest expense, net + rent expense
The leverage ratio is defined as:
Adjusted Debt
EBITDAR
(See additional discussion of Adjusted Debt to EBITDAR below).
As of January 29, 2011 and January 30, 2010, we were in compliance with these covenants. We will continue to monitor these covenants to ensure that
we make any necessary adjustments to our plans and believe that we will remain in compliance with these covenants during 2011.