OfficeMax 2005 Annual Report Download - page 82

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zero and $101.0 million, respectively, during the year ended December 31, 2005, and $6.2 million
and $493.7 million, respectively, during the year ended December 31, 2004. The average amounts
outstanding under the revolving credit facility during the years ended December 31, 2005 and 2004
were $30.3 million and $82.8 million, respectively. The weighted average annual interest rates under
the revolving credit facility were 6.6% in 2005 and 2.8% in 2004. Letters of credit issued under the
revolver totaled $89.6 million as of December 31, 2005. As of December 31, 2005, the maximum
aggregate borrowing amount available under the revolver was $500.0 million.
Borrowings under the revolver bear interest at rates based on either the prime rate or the
London Interbank Offered Rate (‘‘LIBOR’’). Margins are applied to the applicable borrowing rates
and letter of credit fees under the revolver depending on the level of average excess availability. For
borrowings outstanding under the new revolver during the year ended December 31, 2005, the
weighted average interest rate was equal to 6.6%. Fees on letters of credit issued under the
revolver were charged at a weighted average rate of 1.125%. In addition, the Company is also
charged an unused line fee of 0.25 percent on the amount by which the maximum available credit
of $500 million exceeds the average daily outstanding borrowings and letters of credit.
Borrowings under the revolver are secured by a lien on substantially all inventory and related
proceeds. The revolving loan and security agreement contains customary conditions to borrowing
including a monthly calculation of excess borrowing availability and reporting compliance.
Covenants in the revolver agreement restrict the amount of letters of credit that may be issued,
dividend distributions and other uses of cash if excess availability is less than $75 million. At
December 31, 2005, excess availability under the revolver totaled $391.7 million and the Company
was in compliance with all covenants under the revolver agreement. The revolver expires on
June 24, 2010.
The Company’s previous revolving credit facility was entered into in March 2002, and permitted
borrowings of as much as $560 million at variable interest rates based on either LIBOR or the prime
rate. There were no outstanding borrowings under this agreement at December 31, 2004.
In December 2003, the Company entered into a 19-month, unsecured credit agreement with a
group of major financial institutions. Under the agreement, the Company borrowed $150 million at
variable interest rates based on either the LIBOR or the prime rate. Borrowings under this credit
agreement were paid in full on October 29, 2004, with a portion of the proceeds from the Sale.
Other short-term borrowings consist of notes payable and totaled $10.3 million at December
31, 2004.
Timber Notes
In October 2004, the Company sold its timberlands as part of the Sale and received credit-
enhanced timber installment notes receivable in the amount of $1,635 million. (See Note 14, Timber
Notes Receivable.) In December 2004, the Company completed a securitization transaction in which
its interest in the timber installment notes receivable and related guarantees were transferred to
wholly-owned bankruptcy remote subsidiaries that were designated to be qualifying special purpose
entities (the ‘‘OMXQs’’). The OMXQs pledged the timber installment notes receivable and related
guarantees and issued securitization notes in the amount of $1,470 million. Recourse on the
securitization notes is limited to the pledged timber installment notes receivable. The securitization
notes are 15-year non-amortizing, and were issued in two equal $735 million tranches paying
interest of 5.42% and 5.54%, respectively.
As a result of these transactions, OfficeMax received $1,470 million in cash from the OMXQ’s,
and over 15 years will earn approximately $82.5 million per year in interest income on the timber
installment notes receivable and incur interest expense of approximately $80.5 million on the
securitization notes. The pledged timber installment notes receivable and nonrecourse securitization
78