Saks Fifth Avenue 2008 Annual Report Download - page 77

SAKS INCORPORATED & SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—(Continued)
(In thousands, except per share amounts)
letters of credit outstanding under the agreement during 2008 was $34,326. At January 31, 2009, the Company
had $156,675 of direct outstanding borrowings and had letters of credit outstanding of $21,459. The credit
agreement contains default provisions that are typical for this type of financing, including a provision that would
trigger a default under the credit agreement if a default were to occur in another debt instrument resulting in the
acceleration of principal of more than $20,000 under that other instrument.
SENIOR NOTES
At January 31, 2009, the Company had $192,262 of unsecured senior notes outstanding, excluding the
convertible notes, comprised of four separate series having maturities ranging from 2010 to 2019 and interest
rates ranging from 7.00% to 9.88%. The senior notes are guaranteed by all of the subsidiaries that guarantee the
Company’s credit facility and have substantially identical terms except for the maturity dates and interest rates
payable to investors. Subject to certain exceptions, the notes restrict the Company from incurring secured debt or
entering into sale/leaseback transactions that are, in the aggregate greater than 15% (17.5% in the case of the
notes due in 2013) of consolidated net tangible assets of the Company. The notes permit certain sale/leaseback
transactions but place certain restrictions around the use of proceeds generated from a sale/leaseback transaction.
The terms of each senior note require all principal to be repaid at maturity. There are no financial covenants
associated with these notes, and there are no debt-rating triggers.
On April 12, 2007, the Company announced the results of its modified “Dutch Auction” tender offer to
purchase a portion of its 8.25% senior notes due November 15, 2008 for an aggregate purchase price not to
exceed $100 million (the “offer cap”). The offer expired on April 11, 2007. The aggregate principal amount of
notes validly tendered at or above the clearing spread exceeded the offer cap and the Company accepted $95,872
aggregate principal amount of the notes, resulting in an aggregate purchase price of approximately $100,000
(plus an additional $3,230 in aggregate accrued interest on such notes). The Company accepted for purchase first,
all notes tendered at spreads above the clearing spread, and thereafter, the notes validly tendered at the clearing
spread on a prorated basis according to the principal amount of such notes. During the three months ended
May 5, 2007, the Company recorded a loss on extinguishment of debt of approximately $5,222 related to the
repurchase of the notes.
During June and July 2007, the Company repurchased an additional $10,420 in principal amount primarily
relating to its 8.25% senior notes. The repurchase of these notes resulted in a loss on extinguishment of debt of
approximately $412.
CONVERTIBLE NOTES
The Company had $230,000 of convertible senior unsecured notes outstanding at January 31, 2009. The
notes bear interest at a rate of 2.0% per annum and mature in 2024. Interest is payable on the convertible notes on
March 15 and September 15 of each year. The convertible notes are guaranteed by all of the subsidiaries that
guarantee the Company’s revolving credit facility.
In certain circumstances, the provisions of the convertible notes allow the holder to convert the notes to
shares of the Company’s common stock at a conversion rate of 83.5609 shares per one thousand dollars in
principal amount of notes (subject to an anti-dilution adjustment). The Company can settle a conversion of the
notes with shares and/or cash. The holders may convert the notes at the following times, among others: if the
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