Sprouts Farmers Market 2014 Annual Report Download - page 96

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The terms of the Credit Facility allow the Company, subject to certain conditions, to increase the
amount of the term loans and revolving commitments thereunder by an aggregate incremental amount of
up to $160.0 million, plus an additional amount, so long as after giving effect to such increase, (i) in the
case of incremental loans that rank pari passu with the initial term loans, the net first lien leverage ratio
does not exceed 4.00 to 1.00, and (ii) in the case of incremental loans that rank junior to the initial Term
Loan, the total leverage ratio does not exceed 5.25 to 1.00.
Guarantees
Obligations under the Credit Facility are guaranteed by the Company and all of its current and future
wholly owned material domestic subsidiaries. Borrowings under the Credit Facility are secured by (i) a
pledge by Sprouts of its equity interests in Intermediate Holdings and (ii) first-priority liens on substantially
all assets of Intermediate Holdings and the subsidiary guarantors, in each case, subject to permitted liens
and certain exceptions.
Voluntary Prepayments on Term Loan
On August 14, 2014, the Company made a $50.0 million voluntary principal payment on the Term
Loan. Such payment resulted in a $1.1 million loss on extinguishment of debt due to the write-off of
deferred financing costs and original issue discount for the portion of the debt repaid. This loss on
extinguishment of debt is reflected in the Company’s statements of operations for the year ended
December 28, 2014.
On December 27, 2013, the Company made a $40.0 million voluntary principal payment on the Term
Loan. Such repayment resulted in a $1.0 million loss on extinguishment of debt due to the write-off of
deferred financing costs and original issue discount for the portion of the debt repaid. This loss on
extinguishment of debt is reflected in the Company’s statement of operations for the year ended
December 29, 2013.
As of December 28, 2014, the outstanding balance of the Term Loan was $256.4 million, net of issue
discount of $4.9 million. Financing fees and issue discount are being amortized to interest expense over
the term of the Term Loan.
Term Loan and Partial Repayment in IPO
On August 6, 2013, the Company used $340.0 million of the net proceeds from its IPO to make a
partial repayment of the Term Loan. Such repayment resulted in a $9.0 million loss on extinguishment of
debt due to the write-off of deferred financing costs and original issue discount for the portion of the debt
repaid. This loss on extinguishment of debt is reflected in the Company’s statement of operations for the
year ended December 29, 2013.
Interest and Applicable Margin
All amounts outstanding under the Credit Facility will bear interest, at the Company’s option, at a rate
per annum equal to LIBOR (with a 1.00% floor with respect to Eurodollar borrowings under the Term
Loan), adjusted for statutory reserves, plus a margin equal to 3.00%, or an alternate base rate, plus a
margin equal to 2.00%, as set forth in the Credit Facility. These interest margins were reduced to their
current levels (from 3.50% and 2.50%, respectively) effective August 2, 2013, as a result of (i) the
consummation of the Company’s IPO, and (ii) the Company achieving a reduction in the net first lien
leverage ratio to less than or equal to 2.75 to 1.00.
Payments and Prepayments
The Term Loan will mature in April 2020 and will amortize at a rate per annum, in four equal quarterly
installments, in an aggregate amount equal to 1.00% of the original principal balance, with the balance due
on the maturity date.
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