Safeway 2007 Annual Report Download - page 71

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SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
1 and not exceed an Adjusted Debt (total consolidated debt less cash and cash equivalents in excess of $75.0 million) to
Adjusted EBITDA ratio of 3.5 to 1. As of December 29, 2007, the Company was in compliance with the covenant
requirements. As of December 29, 2007, there were no borrowings, and letters of credit totaled $37.1 million under the
Credit Agreement. Total unused borrowing capacity under the Credit Agreement was $1,562.9 million as of
December 29, 2007. The Credit Agreement is scheduled to expire on June 1, 2012.
U.S. borrowings under the Credit Agreement carry interest at one of the following rates selected by the Company: (1) the
prime rate; (2) 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 (3) rates quoted at the discretion 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: (1) the Canadian prime rate or (2) the rate for Canadian bankers acceptances plus the
Pricing Margin.
During 2007 the Company paid facility fees of 0.06% on the total amount of the credit facility.
Shelf Registration In 2004 the Company filed a shelf registration statement covering the issuance from time to time of
up to $2.3 billion of debt securities and/or common stock. As of December 29, 2007, $825.0 million of securities were
available for issuance under the shelf registration. The Company may issue debt or common stock in the future
depending on market conditions, the need to refinance existing debt and capital expenditure plans.
Other Bank Borrowings Other bank borrowings had a weighted average interest rate of 5.08% during 2007 and
4.79% at year-end 2007.
Mortgage Notes Payable Mortgage notes payable at year-end 2007 have remaining terms ranging from less than one
year to 16 years, had a weighted-average interest rate during 2007 of 8.06% and are secured by properties with a net
book value of approximately $129.6 million.
Senior Unsecured Indebtedness Pursuant to the shelf registration described above, in August 2007, Safeway issued
$500.0 million of 6.35% Notes due 2017.
In March 2006, the Company issued senior unsecured debt consisting of $250.0 million of Floating Rate Notes due 2009
under the shelf registration. The interest rate was 5.19% as of December 29, 2007.
In November 2005, the Company issued senior unsecured debt in Canada consisting of CAD300 million (USD301.1
million at December 29, 2007) of 4.45% Notes due 2008.
Other Notes Payable Other notes payable at year-end 2007 have remaining terms ranging from less than one year to
15 years and a weighted average interest rate of 4.07% during 2007.
Fair Value Hedges In 2004 the Company effectively converted $500 million of its 4.95% fixed-rate debt due in 2010
to floating-rate debt through an interest swap agreement. In 2003 the Company effectively converted $300.0 million of
its 4.125% fixed-rate debt to floating-rate debt through an interest rate swap agreement. These swaps are designated as
fair value hedges of fixed-rate debt. For these fair value hedges that qualify for hedge accounting treatment, Safeway
uses the short-cut method, and thus, there are no gains or losses recognized due to hedge ineffectiveness. Unrealized
gains or losses from changes in the value of fair value hedges are offset by changes in the fair value of the hedged
underlying debt. In January 2008, Safeway terminated its interest rate swap agreements on its $500 million debt at a gain
of approximately $7.5 million. This gain will be included in debt and will be amortized as an offset to interest expense
over the remaining term of the debt.
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