Red Lobster 2012 Annual Report Download - page 52

Notes to Consolidated Financial Statements
Darden
48 Darden Restaurants, Inc. 2012 Annual Report
On October 3, 2011, we entered into a new $750.0 million revolving Credit
Agreement (New Revolving Credit Agreement) with BOA, as administrative agent,
and the lenders (New Revolving Credit Lenders) and other agents party thereto.
The New Revolving Credit Agreement is a senior unsecured credit commitment
to the Company and contains customary representations and affirmative and
negative covenants (including limitations on liens and subsidiary debt and a
maximum consolidated lease adjusted total debt to total capitalization ratio of
0.75 to 1.00) and events of default customary for credit facilities of this type.
As of May 27, 2012, we were in compliance with the covenants under the New
Revolving Credit Agreement.
The New Revolving Credit Agreement matures on October 3, 2016, and the
proceeds may be used for commercial paper back-up, working capital and capital
expenditures, the refinancing of certain indebtedness, certain acquisitions and
general corporate purposes. The New Revolving Credit Agreement also contains a
sub-limit of $150.0 million for the issuance of letters of credit. The borrowings
and letters of credit obtained under the New Revolving Credit Agreement may be
denominated in U.S. Dollars, Euro, Sterling, Yen, Canadian Dollars and each other
currency approved by the New Revolving Credit Lenders. The Company could
elect to increase the commitments under the New Revolving Credit Agreement
by up to $250.0 million (to an aggregate amount of up to $1.0 billion), subject to
the Company obtaining commitments from new and existing lenders for the
additional amounts.
Loans under the New Revolving Credit Agreement bear interest at a rate
of LIBOR plus a margin determined by reference to a ratings-based pricing grid
(Applicable Margin), or the base rate (which is defined as the higher of the BOA
prime rate or the Federal Funds rate plus 0.500 percent) plus the Applicable
Margin. Assuming a “BBB” equivalent credit rating level, the Applicable Margin
under the New Revolving Credit Agreement will be 1.075 percent for LIBOR loans
and 0.075 percent for base rate loans. We may also request that loans under the
New Revolving Credit Agreement be made at interest rates offered by one or
more of the New Revolving Credit Lenders, which may vary from the LIBOR or
base rate, for up to $200.0 million of borrowings. The New Revolving Credit
Agreement requires that we pay a facility fee on the total amount of such facility
(ranging from 0.125 percent to 0.250 percent, based on our credit ratings).
As of May 27, 2012, we had no outstanding balances under the New Revolving
Credit Agreement. As of May 27, 2012, $262.7 million of commercial paper and
$70.9 million of letters of credit were outstanding, which were backed by this
facility. After consideration of commercial paper and letters of credit backed by
the New Revolving Credit Agreement, as of May 27, 2012, we had $416.4 million
of credit available under the New Revolving Credit Agreement.
On October 11, 2011, we issued $400.0 million aggregate principal amount
of unsecured 4.500 percent senior notes due October 2021 (the New Senior Notes)
under a registration statement filed with the SEC on October 6, 2010. Discount
and issuance costs, which totaled $5.1 million, are being amortized over the term
of the New Senior Notes using the straight-line method, the results of which
approximate the effective interest method. Interest on the New Senior Notes is
payable semi-annually in arrears on April 15 and October 15 of each year,
commencing April 15, 2012. We may redeem the New Senior Notes at any time
in whole or from time to time in part, at the principal amount plus a make-whole
premium. If we experience a change in control triggering event, unless we have
previously exercised our right to redeem the New Senior Notes, we may be required
to purchase the New Senior Notes from the holders at a purchase price equal to
101 percent of their principal amount plus accrued and unpaid interest.
The interest rates on our $350.0 million 5.625 percent senior notes due
October 2012, $500.0 million 6.200 percent senior notes due October 2017 and
$300.0 million 6.800 percent senior notes due October 2037 are subject to
adjustment from time to time if the debt rating assigned to such series of notes
is downgraded below a certain rating level (or subsequently upgraded). The
maximum adjustment is 2.000 percent above the initial interest rate and the
interest rate cannot be reduced below the initial interest rate. As of May 27,
2012, no adjustments to these interest rates had been made.
Our $350.0 million of unsecured 5.625 percent senior notes due in October
2012 is included in current liabilities as current portion of long-term debt, which
we plan to repay through the issuance of unsecured debt securities in fiscal 2013.
All of our long-term debt currently outstanding is expected to be repaid
entirely at maturity with interest being paid semi-annually over the life of the
debt. The aggregate maturities of long-term debt for each of the five fiscal years
subsequent to May 27, 2012, and thereafter are as follows:
(in millions)
Fiscal Year Amount
2013 $ 350.0
2014 —
2015 —
2016 100.0
2017 —
Thereafter 1,355.9
Long-term debt $1,805.9
Subsequent to our fiscal 2012 year end, on June 18, 2012, we agreed to
issue and sell $80.0 million unsecured 3.790 percent senior notes due in August
2019 and $220.0 million unsecured 4.520 percent senior notes due August 2024
(collectively, the “Notes”), pursuant to the provisions of a Note Purchase Agree-
ment among us and the purchasers named therein. The sale and purchase of the
Notes will occur at a closing in August 2012. We intend to use the net proceeds
from the offering of the Notes for the repayment of existing indebtedness, and for
other general corporate purposes. The Notes were offered in a private placement
transaction exempt from the SEC registration requirements. The Note Purchase
Agreement contains customary representations and affirmative and negative
covenants (including limitations on liens and a provision permitting a maximum
priority debt of 20 percent of consolidated tangible net worth, as such terms are
defined therein). The Note Purchase Agreement also contains events of default
customary for agreements of this type (with customary grace periods, as
฀applicable),฀including฀nonpayment฀of฀principal฀or฀interest฀when฀due;฀material฀
incorrectness฀of฀representations฀and฀warranties฀when฀made;฀breach฀of฀covenants;฀
bankruptcy฀and฀insolvency;฀unsatisfied฀ERISA฀obligations;฀unstayed฀material฀judg-
ment฀beyond฀specified฀periods;฀and฀default฀under฀other฀material฀indebtedness.฀