Saks Fifth Avenue 2009 Annual Report Download - page 34

Table of Contents
At January 30, 2010, the Company had no borrowings under the revolving credit facility. The senior revolving credit facility has a maximum capacity of
$500 million.
Senior Notes
At January 30, 2010, the Company had $169.2 million of senior notes outstanding, excluding the convertible notes, comprising four separate series having
maturities ranging from 2010 to 2019 and interest rates ranging from 7.00% to 9.88%. The terms of each senior note call for all principal to be repaid at maturity.
The senior notes have substantially identical terms except for the maturity dates and interest rates payable to investors. Each senior note contains limitations on
the amount of secured indebtedness the Company may incur.
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 $95.9 million aggregate principal amount of
the notes, resulting in an aggregate purchase price of $100 million (plus an additional $3.2 million 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
approximately $5.2 million related to the repurchase of the notes.
During June and July 2007, the Company extinguished an additional $10.4 million in principal amount primarily relating to its 8.25% senior notes. The
repurchase of these notes resulted in a loss on extinguishment of approximately $0.4 million. The remainder of the 8.25% notes were retired upon maturity on
November 15, 2008.
During June and July 2009, the Company extinguished $23.0 million of its 7.5% senior notes that mature in December 2010. The repurchase of these notes
resulted in a gain on extinguishment of debt of approximately $0.8 million.
7.5% Convertible Notes
At January 30, 2010, the Company had $120 million of convertible notes outstanding that bear cash interest semiannually at an annual rate of 7.5% and
mature in 2013. The provisions of the convertible notes allow the holder to convert the notes at any time to shares of the Company’s common stock at a
conversion rate of 180.5869 shares per one thousand dollars in principal amount of notes. The Company can settle a conversion with shares, cash; or a
combination thereof at its discretion. During 2009, the Company received net proceeds from the convertible notes of approximately $115.3 million after
deducting initial purchasers’ discounts and offering expenses. The Company used the net proceeds to pay down amounts outstanding under its revolving credit
facility and for general corporate purposes.
On February 1, 2009, the Company adopted the provisions of ASC 470 related to accounting for convertible debt instruments that may be settled in cash
upon conversion (including partial cash settlement), which specifies that issuers of such instruments should separately account for the liability and equity
components in a manner that reflects the entity’s nonconvertible debt borrowing rate when interest cost is recognized in subsequent periods.
Upon issuance of the convertible notes, the Company estimated the fair value of the liability component of the 7.5% convertible notes, assuming a 13%
non-convertible borrowing rate, to be $98.0 million. The difference
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Source: SAKS INC, 10-K, March 18, 2010 Powered by Morningstar® Document Research℠