Sprouts Farmers Market 2013 Annual Report Download - page 76

Table of Contents
proceeds from the issuance of equity. We received net proceeds of $131.8 million from borrowings under our Former Term Loan
and issuance of the Notes to finance the Sunflower Transaction during fiscal 2012 (net of financing fees and issue discount). During
2011, we received net proceeds of $293.0 million under our Former Term Loan (net of financing fees and issue discount), proceeds
of $206.0 million from the issuance of shares and an $8.0 million equity contribution from the Apollo Funds, to finance the Henry’s
Transaction, partially offset by a $274.6 million cash distribution to the former parent of Henry’s. Other financing activities also
included $5.5 million in proceeds for the issuance of shares during 2012, and $12.7 million of net transactions between Henry’
s and
Henry’s former parent during fiscal 2011 that did not recur during 2012 following the Henry’s Transaction.
Long-term Debt and Former Credit Facilities
April 2013 Refinancing
Effective as of April 23, 2013 (referred to as the “April 2013 Refinancing Closing Date”),
a subsidiary of the Company (referred
to as “Intermediate Holdings”), as borrower, refinanced the Former Revolving Credit Facility and the Former Term Loan by entering
into the Credit Facility. The Credit Facility provides for a $700.0 million Term Loan and a $60.0 million senior secured Revolving
Credit Facility. The terms of the Credit Facility allow us, subject to certain conditions, to increase the amount of the term loans and
revolving commitments thereunder by an aggregate incremental amount of up to $160.0 million, plus an additional amount, so long
as after giving effect to such increase, (i) in the case of incremental loans that rank pari passu with the initial term loans, the net first
lien leverage ratio does not exceed 4.00 to 1.00, and (ii) in the case of incremental loans that rank junior to the initial Term Loan,
the total leverage ratio does not exceed 5.25 to 1.00. No incremental loans have been committed to by any lender. In addition, $7.4
million of letters of credit were issued in order to backstop, replace or roll-over existing letters of credit under the Former Revolving
Credit Facility.
The proceeds of the Term Loan were used to repay in full the outstanding balance of $403.1 million (as of April 23, 2013)
under our Former Credit Facilities. Such repayment resulted in $8.2 million of loss on extinguishment of debt due to the write-off of
deferred financing costs and original issue discount. The remaining proceeds of the term loans, together with cash on hand, were
used to make a $282 million distribution to our equity holders, to make payments of $13.9 million to vested option holders and to
pay transaction fees and expenses.
Obligations under the Credit Facility are guaranteed by us and all of our current and future wholly owned material domestic
subsidiaries. Our borrowings under the Credit Facility are secured by (i) a pledge by Sprouts of its equity interests in Intermediate
Holdings and (ii) first-priority liens on substantially all assets of Intermediate Holdings and the subsidiary guarantors, in each case,
subject to permitted liens and certain exceptions.
The issue price for the Credit Facility was 99.5% of the principal amount thereof, which original issue discount or upfront fee
will be amortized over the life of the Credit Facility
Interest and Applicable Margin . All amounts outstanding under the Credit Facility bear interest, at our option, at a rate per
annum equal to LIBOR (with a 1.00% floor with respect to Eurodollar borrowings under the Term Loan), adjusted for statutory
reserves, plus a margin equal to 3.00%, or an alternate base rate, plus a margin equal to 2.00%, as set forth in the Credit Facility.
Payments and Prepayments. Subject to exceptions set forth therein, the Credit Facility requires mandatory prepayments, in
amounts equal to (i) 50% (reduced to 25% if net first lien leverage is less than 3.00 to 1.00 but greater than 2.50 to 1.00 and 0% if
net first lien leverage is less than 2.50 to 1.00) of excess cash flow (as defined in the Credit Facility) at the end of each fiscal year,
(ii) 100% of the net
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