Neiman Marcus 2008 Annual Report Download - page 44

Table of Contents
Senior Secured Term Loan Facility. In October 2005, NMG entered into a credit agreement and related security and other
agreements for a $1,975.0 million Senior Secured Term Loan Facility. NMG voluntarily repaid $100.0 million principal amount of its
loans under the Senior Secured Term Loan Facility in fiscal year 2006 and $250 million in fiscal year 2007. At August 1, 2009, the
outstanding balance under the Senior Secured Term Loan Facility was $1,625.0 million (including $26.6 million of borrowings
classified as current liabilities). The principal amount of the loans outstanding is due and payable in full on April 6, 2013.
At August 1, 2009, borrowings under the Senior Secured Term Loan Facility bore interest at a rate per annum equal to, at
NMG's option, either (a) a base rate determined by reference to the higher of (1) the prime rate of Credit Suisse and (2) the federal
funds effective rate plus 1/2 of 1% or (b) a LIBOR rate, subject to certain adjustments, in each case plus an applicable margin. The
interest rate on the outstanding borrowings pursuant to the Senior Secured Term Loan Facility was 2.50% at August 1, 2009. The
applicable margin is subject to adjustment based on contractually defined debt coverage ratios. At August 1, 2009, the applicable
margin with respect to base rate borrowings was 1.00% and the applicable margin with respect to LIBOR borrowings was 2.00%.
See Note 9 of our Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior
Secured Term Loan Facility.
2028 Debentures. In May 1998, NMG issued $125.0 million aggregate principal amount of its 7.125% 2028 Debentures.
NMG's 2028 Debentures mature on June 1, 2028.
See Note 9 of our Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the 2028
Debentures.
Senior Notes. NMG has $734.5 million aggregate principal amount of 9.0% / 9.75% Senior Notes under a senior indenture
(Senior Indenture). NMG's Senior Notes mature on October 15, 2015. We negotiated for the right to include the PIK feature in our
Senior Notes because of our belief that this feature could be a useful tool to enhance liquidity under appropriate circumstances. In the
second quarter of fiscal year 2009, given the dislocation in the financial markets and the uncertainty as to when reasonable conditions
will return, we believed that it was appropriate to utilize this feature, even though we had unused borrowing capacity under our $600.0
million revolving credit facility. Accordingly, we elected to pay PIK Interest for the three quarterly interest periods ending on October
14, 2009 and to make such interest payments with the issuance of additional Senior Notes at the PIK Interest rate of 9.75% instead of
paying interest in cash. As a result, the original principal amount of Senior Notes of $700.0 million increased by $17.1 million on
April 14, 2009 and by $17.4 million on July 14, 2009.
Prior to the beginning of each eligible interest period in the future, we will evaluate whether to continue utilizing this PIK
feature, taking into account market conditions and other relevant factors at that time. After October 15, 2010, we are required to make
all interest payments on the Senior Notes entirely in cash.
See Note 9 of our Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior
Notes.
Senior Subordinated Notes. NMG has $500.0 million aggregate principal amount of 10.375% Senior Subordinated Notes
under a senior subordinated indenture (Senior Subordinated Indenture). NMG's Senior Subordinated Notes mature on October 15,
2015.
See Note 9 of our Notes to Consolidated Financial Statements in Item 15 for a further description of the terms of the Senior
Subordinated Notes.
Interest Rate Swaps. In connection with the Acquisition, we obtained $2,575.0 million of floating rate debt agreements, of
which $2,125.0 million was outstanding at the Acquisition date and $1,625.0 million is outstanding at August 1, 2009 (including $26.6
million of borrowings classified as current liabilities). Effective December 6, 2005, NMG entered into floating to fixed interest rate
swap agreements for an aggregate notional amount of $1,000.0 million to limit our exposure to interest rate increases related to a
portion of our floating rate indebtedness. These swap agreements hedge a portion of our contractual floating rate interest
commitments through the expiration of the agreements in December 2010. As a result of the swap agreements, NMG's effective fixed
interest rates as to the $1,000.0 million in floating rate indebtedness will currently range from 6.831% to 6.983% per quarter through
2010 and result in an average fixed rate of 6.900%.
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