Safeway 2012 Annual Report Download - page 66

SAFEWAY INC. AND SUBSIDIARIES
Notes to Consolidated Financial Statements
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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 December 29, 2012, the Company
was in compliance with these covenant requirements. As of December 29, 2012, there were no borrowings,
and letters of credit totaled $43.6 million under the Credit Agreement. Total unused borrowing capacity under
the credit agreement was $1,456.4 million as of December 29, 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 2012, the Company paid facility fees ranging from 0.125% to 0.15% on the total amount of the credit
facility.
Term Credit Agreement In December 2011, Safeway entered into a $700.0 million term credit agreement
with a syndicate of banks which matures on March 19, 2015. The term credit agreement provided an up to
$700.0 million three-year and three-month senior term credit facility available to Safeway as a delayed draw
term credit facility in two draws (each of which was required to be in minimum amounts of $100.0 million
and increments of $25.0 million) from the closing date through, on or prior to, April 19, 2012. Loans under
the term credit agreement carry interest, at Safeway’s option, at either a Base Rate (as defined in the term
credit agreement) plus a pricing margin or a Eurodollar Rate (as defined in the term credit agreement) plus
a pricing margin. Semi-annual principal payments equal to 5.50% of the aggregate principal amount of the
term loans are required beginning on June 30, 2013, with any remaining principal balances due at the maturity
of the term credit agreement. The term credit agreement covenants are substantially similar to the covenants
contained in Safeway's existing bank credit agreement dated as of June 1, 2011, as previously disclosed
under the caption "Bank Credit Agreement." As of December 29, 2012, the Company was in compliance
with these covenant requirements. As of December 29, 2012, there were $700 million of borrowings under
the term credit agreement with an interest rate of 1.46% and no unused borrowing capacity under the term
credit agreement.
During the availability period in 2012, the Company paid commitment fees of 0.175% on the total amount
available to be drawn under the term credit agreement.
Shelf Registration On October 24, 2011, 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 October 24, 2014. The Safeway Board of Directors authorized issuance of up to $3.0
billion of securities under the Shelf. As of December 29, 2012, $1.95 billion of securities were available for
issuance under the board’s authorization.
Senior Unsecured Indebtedness Safeway issued $250.0 million of Floating Rate Notes on June 14, 2012,
which mature on December 12, 2013. The interest rate on these notes at year-end 2012 was 1.81%.
Canada Safeway Limited, an indirect, wholly-owned subsidiary of Safeway, issued CAD300.0 million of
3.00% Second Series Notes on March 31, 2011, which mature on March 31, 2014. On December 5, 2011,
Safeway issued $400.0 million of 3.40% Senior Notes and $400.0 million of 4.75% Senior Notes which
mature on December 1, 2016 and December 1, 2021, respectively.