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Table of Contents
HSN, INC.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
NOTE 11—LONG-TERM DEBT
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, 2010, the term loan interest rate was equal to LIBOR plus 2.00% (2.27%). The credit agreement
contains two principal financial covenants consisting of a maximum leverage ratio, as defined in the credit agreement, of 2.75x and a minimum
interest coverage ratio, as defined in the credit agreement, of 3.00x, among other covenants. HSNi was in compliance with all such covenants as
of December 31, 2010, with a leverage ratio of 1.21x and an interest coverage ratio of 8.57x. 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, 2010, there were $26.4 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, 2010, the additional amount that could be
borrowed under the revolving credit facility, in consideration of the financial covenants, was approximately $123.6 million. HSNi capitalized
$7.3 million in financing costs related to the credit agreement and HSNi is amortizing 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, 2010, there was no outstanding balance on the revolving credit facility and $69.8 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:
58
December 31,
2010
2009
Secured credit agreement expiring July 25, 2013:
Term loan
$
69,841
$
100,000
Revolving credit facility
—
—
11.25% Senior Notes due August 1, 2016; interest payable each February 1 and August 1 commencing February 1,
2009
240,000
240,000
Unamortized original issue discount on Senior Notes
(1,083
)
(1,278
)
Total long
-
term debt
308,758
338,722
Less: current maturities
(5,820
)
(4,762
)
Long
-
term debt, net of current maturities
$
302,938
$
333,960
Year
Percentage
2012
105.63
%
2013
102.81
%
2014 and thereafter
100.00
%