Safeway 2009 Annual Report Download - page 68

SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
Commercial Paper The amount of commercial paper borrowings 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 refinance these borrowings on a long-term basis through either continued commercial paper borrowings or utilization
of the bank credit agreement, which matures in 2012. The weighted-average interest rate on commercial paper
borrowings during 2009 was 0.32% and was 0.33% at year-end 2009. The weighted-average interest rate on
commercial paper borrowing during 2008 was 4.31% and was 5.82% at year-end 2008.
Bank Credit Agreement The Company has a $1,600.0 million credit agreement (as amended) with a syndicate of
banks which has a termination date of June 1, 2012 and provides for two additional one-year extensions of the
termination date. The credit agreement provides (i) to Safeway a $1,350.0 million revolving credit facility (the “Domestic
Facility”), (ii) to Safeway and Canada Safeway Limited a Canadian facility of up to $250.0 million for U.S. Dollar and
Canadian Dollar advances and (iii) to Safeway a $400.0 million sub-facility of the Domestic Facility for issuance of standby
and commercial letters of credit. The credit agreement also provides for an increase in the credit facility commitments up
to an additional $500.0 million, at the option of the lenders and subject to the satisfaction of certain conditions. The
restrictive covenants of the 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. Additionally, the
Company is required to maintain a minimum Adjusted EBITDA, as defined in the credit agreement, to interest expense
ratio of 2.0 to 1 and is required to 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 January 2, 2010, the Company was in compliance
with these covenant requirements. As of January 2, 2010, there were no borrowings, and letters of credit totaled $47.2
million under the credit agreement. Total unused borrowing capacity under the credit agreement was $1,552.8 million as
of January 2, 2010.
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 2009 the Company paid facility fees of 0.05% on the total amount of the credit facility.
Shelf Registration On December 8, 2008, the Company filed a shelf registration statement (the “Shelf”) with the SEC
which enables Safeway to issue an unlimited amount of debt securities and/or common stock. The Shelf expires on
December 8, 2011. The Safeway Board of Directors has authorized issuance of up to $2.0 billion of securities under the
Shelf. As of January 2, 2010, $1.0 billion of securities were available for issuance under the board’s authorization.
Mortgage Notes Payable Mortgage notes payable at year-end 2009 have remaining terms ranging from less than one
year to 14 years, had a weighted-average interest rate during 2009 of 7.91% and are secured by properties with a net
book value of approximately $62.2 million.
Senior Unsecured Indebtedness Pursuant to the Shelf, Safeway issued $500.0 million of 5.0% Notes on July 31,
2009, which mature on August 15, 2019, and $500.0 million of 6.25% Notes on December 17, 2008, which mature on
March 15, 2014.
In August 2007, Safeway issued $500.0 million of 6.35% Notes which mature on August 15, 2017.
Other Notes Payable Other notes payable at year-end 2009 have remaining terms ranging from five years to 25 years
and a weighted average interest rate of 6.94% during 2009.
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