Sally Beauty Supply 2013 Annual Report Download - page 82

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aggregate principal amount of notes originally issued, subject to certain limitations, with the proceeds from
certain kinds of equity offerings, as defined in the indenture.
The senior notes due 2022 carry optional redemption features whereby the Company has the option to
redeem the notes, in whole or in part, on or after June 1, 2020 at par, plus accrued and unpaid interest, if
any, and on or after June 1, 2017 at par plus a premium declining ratably to par, plus accrued and unpaid
interest, if any. Prior to June 1, 2017, the notes may be redeemed, in whole or in part, at a redemption
price equal to par plus a make-whole premium as provided in the indenture, plus accrued and unpaid
interest, if any. In addition, on or prior to June 1, 2015, the Company has the right to redeem at par plus a
specified premium, plus accrued and unpaid interest, if any, up to 35% of the aggregate principal amount
of notes originally issued, subject to certain limitations, with the proceeds from certain kinds of equity
offerings, as defined in the indenture.
The ABL facility does not contain any restriction against the incurrence of unsecured indebtedness.
However, the ABL facility restricts the incurrence of secured indebtedness if, after giving effect to the
incurrence of such secured indebtedness, the Company’s Secured Leverage Ratio exceeds 4.0 to 1.0. At
September 30, 2013, the Company’s Secured Leverage Ratio was approximately 0.2 to 1.0. Secured
Leverage Ratio is defined as the ratio of (i) Secured Funded Indebtedness (as defined in the ABL facility)
to (ii) Consolidated EBITDA (as defined in the ABL facility).
The ABL facility is pre-payable and the commitments thereunder may be terminated, in whole or in part at
any time without penalty or premium.
The indentures governing the senior notes due 2019-2022 contain terms which restrict the ability of Sally
Beauty’s subsidiaries to incur additional indebtedness. However, in addition to certain other material
exceptions, the Company may incur additional indebtedness under the indentures if its Consolidated
Coverage Ratio, after giving pro forma effect to the incurrence of such indebtedness, exceeds 2.0 to 1.0
(‘‘Incurrence Test’’). At September 30, 2013, the Company’s Consolidated Coverage Ratio was
approximately 6.0 to 1.0. Consolidated Coverage Ratio is defined as the ratio of (i) Consolidated EBITDA
(as defined in the indentures) for the period containing the most recent four consecutive fiscal quarters, to
(ii) Consolidated Interest Expense (as defined in the indentures) for such period.
The indentures governing the senior notes due 2019-2022 restrict Sally Holdings and its subsidiaries from
making certain dividends and distributions to equity holders and certain other restricted payments
(hereafter, a ‘‘Restricted Payment’’ or ‘‘Restricted Payments’’) to us. However, the indentures permit the
making of such Restricted Payments if, at the time of the making of such Restricted Payment, the Company
satisfies the Incurrence Test as described above and the cumulative amount of all Restricted Payments
made since the issue date of the applicable senior notes does not exceed the sum of: (i) 50% of Sally
Holdings’ and its subsidiaries’ cumulative consolidated net earnings since July 1, 2006, plus (ii) the
proceeds from the issuance of certain equity securities or conversions of indebtedness to equity, in each
case, since the issue date of the applicable senior notes plus (iii) the net reduction in investments in
unrestricted subsidiaries since the issue date of the applicable senior notes plus (iv) the return of capital
with respect to any sales or dispositions of certain minority investments since the issue date of the
applicable senior notes. Further, in addition to certain other baskets, the indentures permit the Company
to make additional Restricted Payments in an unlimited amount if, after giving pro forma effect to the
incurrence of any indebtedness to make such Restricted Payment, the Company’s Consolidated Total
Leverage Ratio (as defined in the indentures) is less than 3.25 to 1.00. At September 30, 2013, the
Company’s Consolidated Total Leverage Ratio was approximately 2.7 to 1.0. Consolidated Total Leverage
Ratio is defined as the ratio of (i) Consolidated Total Indebtedness (as defined in the indentures) minus
cash and cash equivalents on-hand up to $100.0 million, in each case, as of the end of the most recently-
ended fiscal quarter to (ii) Consolidated EBITDA (as defined in the indentures) for the period containing
the most recent four consecutive fiscal quarters.
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