Safeway 2008 Annual Report Download - page 49

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SAFEWAY INC. AND SUBSIDIARIES
times, Safeway expects that the participating banks will loan to Safeway under the Credit Agreement. In the fourth
quarter of fiscal 2008, Safeway was able to borrow under the Credit Agreement.
Based upon the current level of operations, Safeway believes that net cash flow from operating activities and other
sources of liquidity, including potential borrowing under Safeway’s commercial paper program and its Credit Agreement,
will be adequate to meet anticipated requirements for working capital, capital expenditures, interest payments, dividend
payments, stock repurchases, if any, and scheduled principal payments for the foreseeable future. There can be no
assurance, however, that Safeway’s business will continue to generate cash flow at or above current levels or that the
Company will maintain its ability to borrow under its commercial paper program and credit agreement.
Bank Credit Agreement The Company has a $1,600.0 million credit agreement (as amended, the “Credit
Agreement”) with a syndicate of banks which has a termination date of June 1, 2012 and provides for two additional
one-year extensions of the termination date. There are approximately 30 banks in the syndicate with individual
commitments to lend ranging from approximately $20 million to approximately $115 million. The Credit Agreement
provides (i) to Safeway a $1,350.0 million revolving credit facility (the “Domestic Facility”), (ii) to Safeway and Canada
Safeway Limited a Canadian facility of up to $250.0 million for U.S. Dollar and Canadian Dollar advances and (iii) to
Safeway a $400.0 million sub-facility of the Domestic Facility for issuance of standby and commercial letters of credit. The
Credit Agreement also provides for an increase in the credit facility commitments up to an additional $500.0 million, at
the option of the lenders and subject to the satisfaction of certain conditions. The restrictive covenants of the Credit
Agreement limit Safeway with respect to, among other things, creating liens upon its assets and disposing of material
amounts of assets other than in the ordinary course of business. Additionally, the Company is required to maintain a
minimum Adjusted EBITDA, as defined in the Credit Agreement, to interest expense ratio of 2.0 to 1 and is required to
not exceed an Adjusted Debt (total consolidated debt less cash and cash equivalents in excess of $75.0 million) to
Adjusted EBITDA ratio of 3.5 to 1. As of January 3, 2009, the Company was in compliance with these covenant
requirements as shown on the following page. As of January 3, 2009, there were no borrowings, and letters of credit
totaled $34.5 million under the Credit Agreement. Total unused borrowing capacity under the Credit Agreement was
$1,565.5 million as of January 3, 2009.
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