OfficeMax 2008 Annual Report Download - page 35

Letters of credit, which may be issued under the revolving credit facility up to a maximum of
$250 million, reduce available borrowing capacity under the revolving credit facility. Standby letters
of credit issued under the revolving credit facility totaled $66.7 million as of December 27, 2008 and
$85.5 million as of December 29, 2007. As of December 27, 2008, the maximum aggregate
borrowing amount available under the revolver was $613.7 million and excess availability under the
revolving credit facility totaled $546.9 million. As of December 29, 2007, the maximum aggregate
borrowing amount available under the revolver was $700 million and excess availability under the
revolving credit facility totaled $614.5 million. At December 27, 2008, the Company was in
compliance with all covenants under the Loan Agreement. The Loan Agreement allows the payment
of dividends, subject to availability restrictions and if no default has occurred. The Loan Agreement
expires on July 12, 2012.
Borrowings under the revolving credit facility 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 revolving credit facility depending on the level of
average excess availability. Fees on letters of credit issued under the revolving credit facility were
charged at a weighted average rate of 0.875% during the year ended December 27, 2008. The
Company is also charged an unused line fee of 0.25% on the amount by which the maximum
available credit exceeds the average daily outstanding borrowings and letters of credit.
As of December 27, 2008, Grupo OfficeMax, our 51% owned joint venture in Mexico, had total
borrowings of $22.9 million. This included $11.2 million under an installment loan agreement that
Grupo OfficeMax entered into during the third quarter of 2008. The joint venture is not in
compliance with its debt covenants relating to the installment loan agreement, but anticipates that
the lending institution will provide a waiver of the covenant violations. The installment loan is due in
60 monthly payments beginning in the second quarter of 2009. The joint venture also has
$11.7 million of short term borrowings of which $4.9 million was refinanced in the first quarter of
2009. The remaining $6.8 million of short term borrowings is a simple revolving loan. The financing
for Grupo OfficeMax is unsecured with no recourse against the Company.
During 2008, the Company made a $6.7 million capital contribution to Grupo OfficeMax,
commensurate with our ownership percentage in the joint venture. The Company may need to
make additional capital contributions in the future.
Timber Notes
In October 2004, as part of the Sale, we sold our timberlands in exchange for $15 million in
cash plus credit-enhanced timber installment notes in the amount of $1,635 million (the ‘‘Installment
Notes’’) issued in two equal $817.5 million tranches. The Installment Note issuers transferred a total
of $1,635 million in cash ($817.5 million each) to Lehman Brothers Holdings Inc. (‘‘Lehman’’) and
Wachovia Corporation (‘‘Wachovia’’) (which was later purchased by Wells Fargo & Co.). Lehman
and Wachovia guaranteed the respective Installment Notes. The note structure allowed us to defer
recognition of the capital gain and payment of the related taxes on the Sale until 2019, the
scheduled maturity date of the Installment Notes.
In December 2004, we completed a securitization transaction in which the interests in the
Installment Notes and related guarantees were transferred to our wholly-owned bankruptcy remote
subsidiaries (‘‘OMXSPEs’’) and pledged as security for securitization notes issued in the amount of
$1,470 million (the ‘‘Securitization Notes’’), with $735 million through the structure supported by
Lehman and $735 million through the structure supported by Wachovia. Recourse on the
Securitization Notes is limited to the applicable pledged Installment Notes and underlying Lehman
and Wachovia guarantees.
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