Safeway 2002 Annual Report Download - page 39

SAFEWAY INC. 2002 ANNUAL REPORT 37
NOTE E: FINANCING
Notes and debentures were composed of the following at
year-end (in millions):
2002 2001
Commercial paper $1,744.1 $1,723.8
Bank credit agreement, unsecured 25.3 –
9.30% Senior Secured Debentures due 2007 24.3 24.3
6.85% Senior Notes due 2004, unsecured 200.0 200.0
7.00% Senior Notes due 2007, unsecured 250.0 250.0
7.45% Senior Debentures due 2027, unsecured 150.0 150.0
3.80% Senior Notes due 2005, unsecured 225.0 –
4.80% Senior Notes due 2007, unsecured 480.0 –
5.80% Senior Notes due 2012, unsecured 800.0 –
6.05% Senior Notes due 2003, unsecured 350.0 350.0
6.50% Senior Notes due 2008, unsecured 250.0 250.0
7.00% Senior Notes due 2002, unsecured –600.0
7.25% Senior Notes due 2004, unsecured 400.0 400.0
7.50% Senior Notes due 2009, unsecured 500.0 500.0
6.15% Senior Notes due 2006, unsecured 700.0 700.0
6.50% Senior Notes due 2011, unsecured 500.0 500.0
7.25% Senior Debentures due 2031, unsecured 600.0 600.0
3.625% Senior Notes due 2003, unsecured 400.0 400.0
9.65% Senior Subordinated Debentures
due 2004, unsecured 81.2 81.2
9.875% Senior Subordinated Debentures
due 2007, unsecured 24.2 24.2
10.00% Senior Notes due 2002, unsecured –6.1
Mortgage notes payable, secured 39.7 60.5
Other notes payable, unsecured 21.6 31.7
Medium-term notes, unsecured 16.5 16.5
Short-term bank borrowings, unsecured 7.6 7.6
7,789.5 6,875.9
Less current maturities (780.3) (639.1)
Long-term portion $7,009.2 $6,236.8
COMMERCIAL PAPER The amount of commercial paper
borrowings is limited to the unused borrowing capacity
under the bank credit agreement. Commercial paper is clas-
sified as long-term because the Company intends to and has
the ability to refinance these borrowings on a long-term
basis through either continued commercial paper borrow-
ings or utilization of the bank credit agreement, which
matures in 2006. The weighted average interest rate on
commercial paper borrowings was 1.98% during 2002 and
1.62% at year-end 2002.
BANK CREDIT AGREEMENT Safeway’s total borrowing
capacity under the bank credit agreement is $2.5 billion. Of
the $2.5 billion credit line, $1.25 billion matures in 2006 and
has a one-year extension option requiring lender consent.
Another $1.25 billion is renewable annually through 2006
and can be extended by the Company for an additional year
through a term-loan conversion feature at the Company’s
option 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 mate-
rial amounts of assets other than in the ordinary course of
business. Safeway is also required to maintain a minimum
adjusted EBITDA (as defined in Safeway’s bank credit
agreement) to interest ratio of 2.0 to 1 and a maximum debt
to adjusted EBITDA ratio of 3.5 to 1. At year-end 2002, the
Company had total unused borrowing capacity under the
bank credit agreement of $720.1 million.
U.S. borrowings under the bank credit agreement carry
interest 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 mar-
gin based on the Company’s debt rating or interest coverage
ratio (the “Pricing Margin”); or (iii) rates quoted at the dis-
cretion of the lenders. Canadian borrowings denominated
in U.S. dollars carry interest at one of the following 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 2.91% during 2002 and at
year-end 2002.
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 August 2002,
Safeway issued senior unsecured debt facilities consisting of
3.80% Notes due 2005 and 5.80% Notes due 2012.
In July 2002, Safeway issued senior unsecured debt facil-
ities consisting of 4.80% Notes due 2007.
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.