Restoration Hardware 2015 Annual Report Download - page 55

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The availability of credit at any given time under the amended and restated credit agreement is limited by reference to a
borrowing base formula based upon numerous factors, including the value of eligible inventory and eligible accounts receivable. As a
result of the borrowing base formula, the actual borrowing availability under the revolving line of credit could be less than the stated
amount of the revolving line of credit (as reduced by the actual borrowings and outstanding letters of credit under the revolving line of
credit). All obligations under the amended and restated credit agreement are secured by substantially all of Restoration Hardware,
Inc.’s assets, including accounts receivable, inventory, intangible assets, property, equipment, goods and fixtures.
Borrowings under the revolving line of credit are subject to interest, at the borrowers’ option, at either the bank’s reference rate
or LIBOR (or the BA Rate or the Canadian Prime Rate, as such terms are defined in the amended and restated credit agreement, for
Canadian borrowings denominated in Canadian dollars or the United States Index Rate or LIBOR for Canadian borrowings
denominated in United States dollars) plus an applicable margin rate, in each case.
The amended and restated credit agreement contains various restrictive covenants, including, among others, limitations on the
ability to grant liens, make loans or other investments, incur additional debt, issue additional equity, merge or consolidate with or into
another person, sell assets, pay dividends or make other distributions or enter into transactions with affiliates, along with other
restrictions and limitations typical to credit agreements of this type and size.
The amended and restated credit agreement does not contain any significant financial or coverage ratio covenants unless the
domestic availability under the revolving line of credit is less than the greater of (i) $20.0 million and (ii) 10% of the lesser of (A) the
aggregate domestic commitments under the amended and restated credit agreement and (B) the domestic borrowing base. If the
availability under the amended and restated credit agreement is less than the foregoing amount, then Restoration Hardware, Inc. is
required to maintain a consolidated fixed charge coverage ratio of at least one to one. Such ratio was approximately the ratio on the
last day of each month on a trailing twelve-month basis of (a) (i) consolidated EBITDA (as defined in the agreement) minus (ii)
capital expenditures, minus (iii) the income taxes paid in cash to (b) the sum of (i) debt service charges plus (ii) certain dividends and
distributions paid. As of January 30, 2016, Restoration Hardware, Inc. was in compliance with all covenants of the amended and
restated credit agreement, and if the availability under the amended and restated credit agreement was less than the amount described
above, Restoration Hardware, Inc. would have been in compliance with the consolidated fixed charge coverage ratio described in the
previous sentence.
The amended and restated credit agreement requires a daily sweep of cash to prepay the loans under the agreement while (i) an
event of default exists or (ii) the availability under the revolving line of credit for extensions of credit is less than the greater of (A)
$20.0 million and (B) 10% of the lesser of the domestic commitments and the domestic borrowing base.
On June 27, 2014, we paid off the principal balance and related interest under the prior credit agreement of $154.8 million using
proceeds from the issuance of the 2019 Notes. As of January 30, 2016, Restoration Hardware, Inc. had no amounts outstanding under
the amended and restated credit agreement. As of January 30, 2016, Restoration Hardware, Inc. had $535.4 million undrawn
borrowing availability under the amended and restated credit agreement and had $15.0 million in outstanding letters of credit.