Saks Fifth Avenue 2011 Annual Report Download - page 29

There are no debt ratings-based provisions in the revolving credit facility. The facility contains default provisions
that are typical for this type of financing, including a provision that would trigger a default of the facility if a
default were to occur in another debt instrument resulting in the acceleration of more than $20.0 million in
principal under that other instrument. Borrowings under the facility bear interest at a per annum rate of either:
(i) LIBOR plus a percentage ranging from 2.00% to 2.50%, or (ii) the higher of the prime rate or the federal funds
rate plus a percentage ranging from 1.00% to 1.50%. Letters of credit are charged a per annum fee equal to the
then applicable LIBOR borrowing spread (for standby letters of credit) or the applicable LIBOR spread minus
0.50% (for documentary or commercial letters of credit). The Company also pays a fee ranging from 0.38% to
0.50% per annum on the average daily unused borrowing capacity. The facility includes a fixed-charge coverage
ratio requirement of 1.0 to 1.0 that the Company is subject to only if availability under the facility is less than
$62.5 million. As of January 28, 2012, the Company was not subject to the fixed charge coverage ratio
requirement.
Senior Notes
Excluding the convertible notes, as of January 28, 2012, the Company had $2.1 million of senior notes
outstanding that mature in 2013 with an interest rate of 7.0%. The terms of the senior notes call for all principal
to be repaid at maturity and places limitations on the amount of secured indebtedness the Company may incur.
There are no financial covenants or debt-ratings-based provisions associated with these notes. The Company
believes it will have sufficient cash on hand, availability under its revolving credit facility, and access to various
capital markets to repay the senior notes at maturity.
During October 2011, the Company paid $141.6 million upon maturity of its 9.875% senior notes.
During April 2011, the Company completed a redemption of $1.9 million of its 7.375% senior notes that were
set to mature in 2019. The redemption of these notes resulted in a loss on extinguishment of $0.5 million.
During December 2010, the Company paid $22.9 million upon maturity of its 7.5% senior notes.
During May 2010, the Company repurchased $0.8 million of its 7.0% senior notes that were set to mature in
December 2013. The repurchase of these notes resulted in an immaterial loss on extinguishment of debt.
In June and July 2009, the Company repurchased $23.0 million of its 7.5% senior notes that matured in
December 2010. The repurchase of these notes resulted in a gain on extinguishment of $0.8 million.
7.5% Convertible Notes
As of January 28, 2012, the Company had $120.0 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. In May 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.
Upon issuance of the convertible notes, the Company estimated the fair value of the liability component of the
7.5% convertible notes, assuming a 13.0% non-convertible borrowing rate, to be $98.0 million. The difference
between the fair value and the principal amount of the 7.5% convertible notes was $22.0 million. This amount
was recorded as a debt discount and as an increase to additional paid-in capital as of the issuance date. The
current unamortized discount of $10.4 million is being accreted to interest expense over the remaining 1.8 year
period to the maturity date of the notes in December 2013 resulting in an increase in non-cash interest
expense.
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