Safeway 2001 Annual Report Download - page 32

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COMMERCIAL PAPER The amount of commercial paper bor-
rowings is limited to the unused borrowing capacity under the
bank credit agreement. Commercial paper is classified as long-
term because the Company intends to and has the ability to refi-
nance these borrowings on a long-term basis through either
continued commercial paper borrowings or utilization of the
bank credit agreement, which matures in 2006. The weighted
average interest rate on commercial paper borrowings was 4.78%
during 2001 and 3.54% at year-end 2001.
BANK CREDIT AGREEMENT Safeway’s total borrowing capacity
under the bank credit agreement is $2.5 billion. Of the $2.5 bil-
lion credit line, $1.25 billion matures in 2006 and has a one-year
extension option requiring lender consent. Another $1.25 bil-
lion is renewable annually through 2006 and can be extended by
the Company for an additional year through a term-loan con-
version feature or through a one-year extension option requiring
lender consent. The restrictive covenants of the bank 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. Safeway
is also required to maintain a minimum EBITDA to interest
ratio of 2.0 to 1 and a maximum debt to EBITDA ratio of 3.5
to 1. At year-end 2001, the Company had total unused borrow-
ing capacity under the bank credit agreement of $739 million,
after reductions for commercial paper and standby letters of credit.
U.S. borrowings under the bank credit agreement carry inter-
est at one of the following rates selected by the Company: (i) the
prime rate; (ii) a rate based on rates at which Eurodollar deposits
are offered to first-class banks by the lenders in the bank credit
agreement plus a pricing margin based on the Company’s debt
rating or interest coverage ratio (the “Pricing Margin”); or (iii)
rates quoted at the discretion of the lenders. Canadian borrowings
denominated in U.S. dollars carry interest at one of the follow-
ing rates selected by the Company: (a) the Canadian base rate;
or (b) the Canadian Eurodollar rate plus the Pricing Margin.
Canadian borrowings denominated in Canadian dollars carry
interest at one of the following rates selected by the Company:
(i) the Canadian prime rate or (ii) the rate for Canadian bankers
acceptances plus the Pricing Margin.
The weighted average interest rate on borrowings under the
bank credit agreement was 5.21% during 2001.
SENIOR SECURED INDEBTEDNESS The 9.30% Senior Secured
Debentures due 2007 are secured by a deed of trust that created
a lien on the land, buildings and equipment owned by Safeway
at its distribution center in Tracy, California.
SENIOR UNSECURED INDEBTEDNESS In November 2001,
Safeway issued senior unsecured debt facilities consisting of
3.625% Notes due 2003.
In March 2001, Safeway issued senior unsecured debt facilities
consisting of 6.15% Notes due 2006 and 6.50% Notes due 2011.
In January 2001, Safeway issued 7.25% senior unsecured
debentures due 2031.
In September 1999, Safeway issued senior unsecured debt
facilities consisting of 7.00% Notes due 2002, 7.25% Notes due
2004 and 7.5% Notes due 2009.
In 1998 Safeway issued senior unsecured debt securities con-
sisting of 5.75% Notes due 2000, 5.875% Notes due 2001,
6.05% Notes due 2003 and 6.50% Notes due 2008. On
November 15, 2001, the 5.875% Notes were paid and on
November 15, 2000, the 5.75% Notes were paid.
In 1997 Safeway issued senior unsecured debt securities con-
sisting of 6.85% Senior Notes due 2004, 7.00% Senior Notes
due 2007 and 7.45% Senior Debentures due 2027.
SENIOR SUBORDINATED INDEBTEDNESS The 9.65% Senior
Subordinated Debentures due 2004 and 9.875% Senior
Subordinated Debentures due 2007 are subordinated in right of
payment to, among other things, the Company’s borrowings
under the bank credit agreement, the 9.30% Senior Secured
Debentures, the Senior Unsecured Indebtedness and mortgage
notes payable.