Pottery Barn 2007 Annual Report Download - page 60

Memphis-Based Distribution Facilities Obligation
See Note F for a discussion on our bond-related debt pertaining to our Memphis-based distribution facilities.
Mississippi Industrial Development Bonds
In June 2004, in an effort to utilize tax incentives offered to us by the state of Mississippi, we entered into an
agreement whereby the Mississippi Business Finance Corporation issued $15,000,000 in long-term variable rate
industrial development bonds, the proceeds, net of debt issuance costs, of which were loaned to us to finance the
acquisition and installation of leasehold improvements and equipment located in our Olive Branch, Mississippi
distribution center. The bonds are marketed through a remarketing agent and are secured by a letter of credit
issued under our $300,000,000 line of credit facility. The bonds mature on June 1, 2024. The bond rate resets
each week based upon current market rates. The rate in effect at February 3, 2008 was 3.4%.
The bond agreement allows for each bondholder to tender their bonds to the trustee for repurchase, on demand, with
seven days advance notice. In the event the remarketing agent fails to remarket the bonds, the trustee will draw upon
the letter of credit to fund the purchase of the bonds. As of February 3, 2008, $13,150,000 remained outstanding on
these bonds and was classified as current debt. The bond proceeds were restricted for use in the acquisition and
installation of leasehold improvements and equipment located in our Olive Branch, Mississippi distribution center.
The aggregate maturities of long-term debt at February 3, 2008 were as follows:
Dollars in thousands
Fiscal 2008 $14,734
Fiscal 2009 1,438
Fiscal 2010 1,461
Fiscal 2011 1,414
Fiscal 2012 1,535
Thereafter 5,390
Total $25,972
Credit Facility
As of February 3, 2008, we have a credit facility that provides for a $300,000,000 unsecured revolving line of credit
that may be used for loans or letters of credit and contains certain financial covenants, including a maximum
leverage ratio (funded debt adjusted for lease and rent expense to EBITDAR), and covenants limiting our ability to
dispose of assets, make acquisitions, be acquired, incur indebtedness, grant liens and make investments. Prior to
April 4, 2011, we may, upon notice to the lenders, request an increase in the new credit facility of up to
$200,000,000, to provide for a total of $500,000,000 of unsecured revolving credit. The credit facility contains
events of default that include, among others, non-payment of principal, interest or fees, violation of covenants,
inaccuracy of representations and warranties, bankruptcy and insolvency events, material judgments, cross defaults
to certain other indebtedness and events constituting a change of control. The occurrence of an event of default will
increase the applicable rate of interest by 2.0% and could result in the acceleration of our obligations under the
credit facility and an obligation of any or all of our U.S. subsidiaries to pay the full amount of our obligations under
the credit facility. The credit facility matures on October 4, 2011, at which time all outstanding borrowings must be
repaid and all outstanding letters of credit must be cash collateralized.
We may elect interest rates calculated at Bank of America’s prime rate (or, if greater, the average rate on
overnight federal funds plus one-half of one percent) or LIBOR plus a margin based on our leverage ratio.
During fiscal 2007, we had borrowings under the credit facility of $189,000,000, however, no amounts were
outstanding under the credit facility as of February 3, 2008. No amounts were borrowed under the credit facility
in fiscal 2006. As of February 3, 2008, $36,229,000 in issued but undrawn standby letters of credit was
outstanding under the credit facility. The standby letters of credit were issued to secure the liabilities associated
with workers’ compensation, other insurance programs and certain debt transactions. As of February 3, 2008, we
were in compliance with our financial covenants under the credit facility.
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