Sally Beauty Supply 2007 Annual Report Download - page 65

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$52.1 million, and $40.0 million under Alberto-Culver's revolving credit facility, which was offset by repayments of $40.0 million.
Credit Facilities
In connection with the Separation Transactions, we, through our subsidiaries: (i) entered into the Term Loans in an aggregate amount of $1,070.0 million;
(ii) issued senior notes in an aggregate amount of $430.0 million and senior subordinated notes in an aggregate amount of $280.0 million (the Notes); and
(iii) entered into the $400.0 million ABL facility, subject to borrowing base limitations, of which approximately $70.0 million was drawn at closing, which
resulted in the incurrence of aggregate indebtedness in connection with the Separation Transactions of approximately $1,850.0 million. Proceeds from this new
debt and the $575.0 million equity investment by the CDR Investors were used to pay a $25.00 per share cash dividend to holders of record of Alberto-Culver
shares as of the record date for the Separation Transactions. See "Risk Factors—Risks Relating to Our Substantial Indebtedness."
As of September 30, 2007, there were outstanding borrowings of $1,053.3 million under the Term Loans, at a weighted average interest rate of 8.0%, and
outstanding borrowings of $710.0 million under the Notes, at a weighted average interest rate of 9.75%. In addition, we had $11.4 million outstanding
borrowings under our ABL facility. As of September 30, 2007, we had $334.6 million available for additional borrowings under our ABL facility, subject to
borrowing base limitations, as reduced by outstanding letters of credit.
The agreements and instruments governing our debt contain restrictions and limitations that could significantly impact our ability to operate our business. These
restrictions and limitations relate to:
• disposal of assets • making investments (including joint ventures)
• incurrence of additional indebtedness (including
guarantees of additional indebtedness)
• mergers, consolidations or sales of subsidiaries'
assets
• stock repurchase, dividends and distributions • transactions with affiliates
• certain debt prepayments and modifications • ability of subsidiaries to pay dividends
• liens on assets
In addition, the ABL facility contains restrictions and limitations related to: (i) changing our line of business; (ii) changing our fiscal year; and (iii) creating or
incurring negative pledges.
The Term Loans and the ABL facility are secured by substantially all of our assets, those of Sally Investment Holdings LLC, those of our domestic subsidiaries
and, in the case of the ABL facility, those of our Canadian subsidiaries. The Term Loans may be prepaid at our option at any time without premium or penalty
and is subject to mandatory prepayment in an amount equal to 50% of excess cash flow (as defined in the agreement governing the Term Loans) for any fiscal
year (commencing in fiscal year 2008) unless a specified leverage ratio is met and 100% of the proceeds of specified asset sales that are not reinvested in the
business or applied to repay borrowings under the ABL facility.
The Term Loans contain a covenant requiring Sally Holdings and its subsidiaries to comply with maximum consolidated secured leverage ratio levels, which
will decline over time. The consolidated secured leverage ratio will be tested quarterly, with a maximum ratio of 5.25 for the four quarter period ending
September 30, 2007. The consolidated secured leverage ratio is a ratio of (A) net consolidated secured debt to (B) Consolidated EBITDA as defined in the
agreement underlying the Term Loans.
The ABL facility contains a covenant requiring Sally Holdings and its subsidiaries to maintain a fixed-charge coverage ratio of at least 1.0 to 1.0 when
availability under the ABL facility falls below $40.0 million. The fixed-charge coverage ratio is defined as the ratio of (A) EBITDA (as defined in the agreement
underlying the ABL facility, or Credit Agreement EBITDA), less unfinanced capital
57
Source: Sally Beauty Holding, 10-K, November 29, 2007