Debt

12 Months Ended

Apr. 02, 2011


14.	Debt

Debt consists of the following:


	April 2,		April 3,
	2011		2010
	(millions)

Revolving credit facilities	$	—	$	—
4.5% Euro-denominated notes due October 2013		291.9		282.1

Total long-term debt	$	291.9	$	282.1

Euro Debt

As of April 2, 2011, the Company had outstanding €209.2 million principal amount of 4.5% notes due October 4, 2013 (the “Euro Debt”). The Company has the option to redeem all of the outstanding Euro Debt at any time at a redemption price equal to the principal amount plus a premium. The Company also has the option to redeem all of the outstanding Euro Debt at any time at par plus accrued interest in the event of certain developments involving U.S. tax law. Partial redemption of the Euro Debt is not permitted in either instance. In the event of a change of control of the Company, each holder of the Euro Debt has the option to require the Company to redeem the Euro Debt at its principal amount plus accrued interest. The indenture governing the Euro Debt (the “Indenture”) contains certain limited covenants that restrict the Company’s ability, subject to specified exceptions, to incur liens or enter into a sale and leaseback transaction for any principal property. The Indenture does not contain any financial covenants.

In July 2009, the Company completed a cash tender offer and used $121.0 million to repurchase €90.8 million of principal amount of its then outstanding €300 million principal amount of 4.5% notes due October 4, 2013 at a discounted purchase price of approximately 95%. A net pretax gain of $4.1 million related to this extinguishment of debt was recorded during the second quarter of Fiscal 2010 and classified as a component of interest and other income, net in the Company’s consolidated statements of operations. The Company used its cash on-hand to fund the debt extinguishment.

Refer to Note 16 for discussion of the designation of the Company’s Euro Debt as a hedge of its net investment in certain of its European subsidiaries.

Revolving Credit Facilities

Global Credit Facility

On March 10, 2011, the Company entered into a new credit facility that provides for a $500 million senior unsecured revolving line of credit through March 2016 (the “Global Credit Facility”). The Global Credit Facility replaced the Company’s previous $450 million unsecured revolving line of credit scheduled to mature in November 2011. Key changes under the Global Credit Facility include:


	•	an increase in the ability of the Company to expand its additional borrowing availability from $600 million under the previous facility to $750 million, subject to the agreement of one or more new or existing lenders under the facility to increase their commitments;

	•	an increase in the margin over LIBOR paid by the Company on amounts drawn under the Global Credit Facility to 112.5 basis points (subject to adjustment based on the Company’s credit ratings) from 25 basis points;

	•	an increase in the commitment fee for the unutilized portion of the Global Credit Facility to 15 basis points (subject to adjustment based on the Company’s credit ratings) from 7 basis points; and

	•	an ability to denominate borrowings in currencies other than U.S. dollars, including Euros, Hong Kong Dollars, and Japanese Yen.

Consistent with the previous facility, the Global Credit Facility is also used to support the issuance of letters of credit. As of April 2, 2011, there were no borrowings outstanding under the Global Credit Facility and the Company was contingently liable for $16.8 million of outstanding letters of credit.

U.S. Dollar-denominated borrowings under the Global Credit Facility bear interest, at the Company’s option, either at (a) a base rate, by reference to the greatest of: (i) the annual prime commercial lending rate of JPMorgan Chase Bank, N.A. in effect from time to time, (ii) the weighted-average overnight Federal funds rate plus 50 basis points, or (iii) the one-month London Interbank Offered Rate (“LIBOR”) plus 100 basis points; or (b) LIBOR, adjusted for the Federal Reserve Board’s Eurocurrency liabilities maximum reserve percentage, plus a spread of 112.5 basis points, subject to adjustment based on the Company’s credit ratings (“Adjusted LIBOR”). Foreign currency-denominated borrowings bear interest at Adjusted LIBOR, as described above. There are no mandatory reductions in borrowing ability throughout the term of the Global Credit Facility.

In addition to paying interest on any outstanding borrowings under the Global Credit Facility, the Company is required to pay a commitment fee to the lenders under the Global Credit Facility in respect of the unutilized commitments. The commitment fee rate of 15 basis points under the terms of the Global Credit Facility is subject to adjustment based on the Company’s credit ratings.

The Global Credit Facility contains a number of covenants that, among other things, restrict the Company’s ability, subject to specified exceptions, to incur additional debt; incur liens, sell or dispose of assets; merge with or acquire other companies; liquidate or dissolve itself; engage in businesses that are not in a related line of business; make loans, advances, or guarantees; engage in transactions with affiliates; and make investments. The Global Credit Facility also requires the Company to maintain a maximum ratio of Adjusted Debt to Consolidated EBITDAR (the “leverage ratio”) of no greater than 3.75 as of the date of measurement for the four most recent consecutive fiscal quarters. Adjusted Debt is defined generally as consolidated debt outstanding plus 8 times consolidated rent expense for the last four consecutive fiscal quarters. Consolidated EBITDAR is defined generally as consolidated net income plus (i) income tax expense, (ii) net interest expense, (iii) depreciation and amortization expense and (iv) consolidated rent expense. As of April 2, 2011, no Event of Default (as such term is defined pursuant to the Global Credit Facility) has occurred under the Company’s Global Credit Facility.

Upon the occurrence of an Event of Default under the Global Credit Facility, the lenders may cease making loans, terminate the Global Credit Facility and declare all amounts outstanding to be immediately due and payable. The Global Credit Facility specifies a number of events of default (many of which are subject to applicable grace periods), including, among others, the failure to make timely principal, interest and fee payments or to satisfy the covenants, including the financial covenant described above. Additionally, the Global Credit Facility provides that an Event of Default will occur if Mr. Ralph Lauren, the Company’s Chairman and Chief Executive Officer, and entities controlled by the Lauren family fail to maintain a specified minimum percentage of the voting power of the Company’s common stock.

Chinese Credit Facility

On February 10, 2011, two of the Company’s subsidiaries, Polo Ralph Lauren Trading (Shanghai) Co., LTD and Polo Ralph Lauren Commerce and Trading (Shanghai) Co., LTD, entered into an uncommitted credit facility that provides for a revolving line of credit of up to 70 million Chinese Renminbi (approximately $10 million) through February 9, 2012 (the “Chinese Credit Facility”). The Chinese Credit Facility will be used to fund general working capital funding needs of the Company’s operations in China. The borrowing availability under the Chinese Credit Facility is at the sole discretion of JPMorgan Chase Bank (China) Company Limited, Shanghai Branch (the “Bank”) and is subject to availability of the Bank’s funds and satisfaction of certain regulatory requirements. Borrowings under the Chinese Credit Facility are guaranteed by the Polo Ralph Lauren Corporation and bear interest at either (i) at least 90% of the short-term interest rate published by the People’s Bank of China or (ii) a rate determined by the Bank at its discretion based on prevailing market conditions. As of April 2, 2011, there were no borrowings outstanding under the Chinese Credit Facility.

Fair Value of Debt

Based on the prevailing level of market interest rates as of April 2, 2011, the fair value of the Company’s Euro Debt exceeded its carrying value by approximately $13 million. As of April 3, 2010, the fair value of the Euro Debt exceeded its carrying value by approximately $10 million. Unrealized gains or losses on debt do not result in the realization or expenditure of cash, unless the debt is retired prior to its maturity.