Home Shopping Network 2008 Annual Report Download - page 59

HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
56
NOTE 11—LONG-TERM DEBT
2008 2007
Secured credit agreement expiring July 25, 2013:
Term loan $ 150,000 $ -
Revolving credit facility 20,000 -
11.25% Senior Notes due August 1, 2016; interest payable each
February 1 and August 1 commencing February 1, 2009 240,000 -
Unamortized original issue discount on Senior Notes (1,472) -
Total long-term debt 408,528 -
Less: current maturities (15,000) -
Long-term debt, net of current maturities
$ 393,528
$ -
December 31,
On July 25, 2008, HSNi entered into a secured credit agreement with a syndicate of banks relating to a
$150 million term loan and a $150 million revolving credit facility, each having a five year maturity. Certain HSNi
subsidiaries have unconditionally guaranteed HSNi's obligation under the credit agreement, which is secured by
substantially all of HSNi’s assets. The credit agreement bears interest based on our financial leverage and, as of
December 31, 2008, the term loan interest rate was equal to LIBOR plus 2.75% (4.65%) and the revolving credit
facility interest rate was equal to the U.S. Prime Rate plus 1.25% (4.50%). The credit agreement contains financial
covenants consisting of a leverage ratio and an interest coverage ratio among other covenants. HSNi was in
compliance with all such covenants as of December 31, 2008. The amount available to us under the credit agreement
is reduced by the amount of commercial and standby letters of credit issued under the revolving credit facility
portion of the agreement. As of December 31, 2008, there were $14.7 million of outstanding commercial and
standby letters of credit issued under the revolving credit facility. The ability to draw funds under the revolving
credit facility is dependent upon meeting the aforementioned financial covenants, which may limit HSNi’s ability to
draw the full amount of the facility. As of December 31, 2008, the additional amount that could be borrowed under
the revolving credit facility, in consideration of the financial covenants, was approximately $47.0 million. HSNi
capitalized $7.3 million in financing costs related to the credit agreement, and HSNi will amortize these costs to
interest expense over the credit agreement's five-year life. The annual fee to maintain the revolving credit facility is
50 basis points on the revolving credit facility portion of the credit agreement. As of December 31, 2008, there was
$20.0 million outstanding on the revolving credit facility and $150 million outstanding related to the term loan.
On July 28, 2008, HSNi issued $240 million of 11.25% senior notes due 2016 (the “Senior Notes”). The
Senior Notes are unsecured and subordinated to all of HSNi’s secured debt. The Senior Notes were issued at a
discount of $1.6 million, which along with other issuance expenses of $7.3 million are being amortized to interest
expense over the eight year term of the Senior Notes. At any time prior to August 1, 2012, we may redeem the
Senior Notes at a redemption price equal to the sum of the principal amount thereof, plus accrued interest and a
make-whole premium. Thereafter, we may redeem the Senior Notes at the redemption prices set forth
below, together with accrued and unpaid interest thereon to the applicable redemption date, if redeemed during the
12-month period beginning on June 15 of the years indicated below:
Year
Percentage
2012
105.625%
2013
102.813%
2014 and thereafter
100.000%
In addition, prior to August 1, 2011, we may redeem up to 35% of the aggregate principal amount of the
Senior Notes at a redemption price equal to 111.25% of the principal amount thereof, plus accrued interest with the
net cash proceeds from certain equity offerings. If we experience a change of control, we may be required to offer to
purchase the Senior Notes at a purchase price equal to 101% of the principal amount, plus accrued interest.
Substantially all of our domestic subsidiaries have unconditionally guaranteed the Senior Notes. The
indenture governing the Senior Notes contains covenants that limit our ability and the ability of our subsidiaries to,
among other things, incur additional indebtedness, pay dividends or make other distributions or repurchase or