Long-term Debt and Bank Credit Facilities

12 Months Ended

Dec. 29, 2012

Debt Disclosure [Text Block]

(7)           Long‑term Debt and Bank Credit Facilities

Long‑term debt as of the end of fiscal 2012 and 2011 is summarized as follows:

(In thousands)		2012		2011
Asset-backed credit agreement:
Revolving credit	$	188,825	$	135,400
Senior subordinated convertible debt, 3.50% due in 2035		148,724		142,481
Industrial development bonds, 5.60% to 6.00% due in various installments through 2014		-		1,260
Notes payable and mortgage notes, variable rate due in various installments through 2019		18,702		-
Total debt		356,251		279,141
Less current maturities		-		(595)
Long-term debt	$	356,251	$	278,546

Asset-backed Credit Agreement

On December 21, 2011, the Company and its subsidiaries entered into a credit agreement and related security and other agreements with Wells Fargo and the Lenders party thereto (the "Credit Agreement"), providing for a $520.0 million revolving asset-backed credit facility, which included a $50.0 million Swing Line sub-facility and a $75.0 million letter of credit sub-facility (the "Revolving Credit Facility").  At the inception of the agreement, we were required to maintain a reserve of $100.0 million with respect to the Senior Subordinated Convertible Debt, which reserve has now increased to $150.0 million commencing on December 15, 2012.  Provided no event of default is then existing or would arise, the Company may from time-to-time, request that the Revolving Credit Facility be increased by an aggregate amount (for all such requests) not to exceed $250.0 million.  On December 21, 2011, the Company (a) borrowed $151.7 million under the Revolving Credit Facility to pay-off outstanding principal and interest due pursuant to the credit agreement among the Company, various Lenders, Bank of America, N.A , as Administrative Agent, et al, dated as of April 11, 2008 (the "B of A Credit Agreement"), to pay closing costs and for other general corporate purposes and (b) rolled forward its existing letters of credit totaling $11.0 million into the new Credit Agreement.  The Credit Agreement is collateralized by a first priority perfected security interest on all real and personal property of the Company and its subsidiaries, including (i) a perfected pledge of all of the equity interests held by the Company and its subsidiaries and (ii) mortgages encumbering certain real estate owned by the Company, subject to certain exceptions.  The obligations of the Company and its subsidiaries under the Credit Agreement are unconditionally cross-guaranteed by the Company and its subsidiaries.

The syndicate of lenders for the original Credit Agreement included: Wells Fargo Capital Finance, LLC, as Administrative Agent, Collateral Agent, Swing Line Lender; Wells Fargo Bank, N.A. and Bank of America, N.A. as L/C Issuers; JPMorgan Chase Bank, N.A. and BMO Harris Bank, N.A. as Syndication Agents; Bank of America, N.A. and Barclays Bank PLC as Documentation Agents; and Wells Fargo Capital Finance, LLC, J.P. Morgan Securities LLC, BMO Capital Markets and Merrill Lynch, Pierce, Fenner and Smith Incorporated as Joint Lead Arrangers and Joint Book Managers.

On November 27, 2012, the Company and its subsidiaries entered into Amendment No. 1 (the “Amendment”) to its Credit Agreement dated as of December 21, 2011.

Among other things, the Amendment (i) increased the commitments under the Credit Agreement by $70.0 million to $590.0 million, including within the increase a first-in last-out tranche (“FILO Tranche Loans”) of $30.0 million which amortizes by $2.5 million on the first day of each fiscal quarter beginning March 24, 2013, (ii) extended the maturity of the Credit Agreement by one year to December 21, 2017, and (iii) provided for increases to advance rates of certain components of the borrowing base as well as permitting the inclusion of asset classes in the borrowing base that were previously excluded.

The principal amount outstanding under the amended Revolving Credit Facility, plus interest accrued and unpaid thereon, will be due and payable in full at maturity on December 21, 2017.  The Company can elect, at the time of borrowing, for loans to bear interest at a rate equal to either the base rate or LIBOR plus a margin.  The LIBOR interest rate margin can vary quarterly in 0.25% increments between three pricing levels ranging from 1.50% to 2.00%, except for FILO Tranche Loans which bear interest at a rate equal to LIBOR plus 2.75%. The pricing levels for the non-FILO Tranche Loans are based on the Excess Availability, which is defined in the Credit Agreement as (a) the lesser of (i) the borrowing base; or (ii) the aggregate commitments; minus (b) the aggregate of the outstanding credit extensions.  The LIBOR interest rate margin was 1.75% as of December 29, 2012.

At December 29, 2012, $238.5 million was available under the Revolving Credit Facility after giving effect to outstanding borrowings and to $12.7 million of outstanding letters of credit primarily supporting workers’ compensation obligations.

The Credit Agreement contains no financial covenants unless and until (i) the continuance of an event of default under the Credit Agreement, or (ii) the failure of the Company to maintain Excess Availability equal to or greater than 10% of the borrowing base at any time, in which event, the Company must comply with a trailing 12-month basis consolidated fixed charge covenant ratio of 1.0 : 1.0, which ratio shall continue to be tested each period thereafter until Excess Availability exceeds 10% of the borrowing base for three consecutive fiscal periods.

The Credit Agreement contains usual and customary covenants for a facility of this type requiring the Company and its subsidiaries, among other things, to maintain collateral, comply with applicable laws, keep proper books and records, preserve corporate existence, maintain insurance and pay taxes in a timely manner. Events of default under the Credit Agreement are usual and customary for transactions of this type, subject to, in specific instances, materiality and cure periods including, among other things: (a) any failure to pay principal thereunder when due or to pay interest or fees on the due date; (b) material misrepresentations; (c) default under other agreements governing material indebtedness of the Company; (d) default in the performance or observation of any covenants; (e) any event of insolvency or bankruptcy; (f) any final judgments or orders to pay more than $15.0 million that remain unsecured or unpaid; (g) change of control, as defined in the Credit Agreement; and (h) any failure of a collateral document, after delivery thereof, to create a valid mortgage or first-priority lien.

                We are currently in compliance with all covenants contained within the credit agreement.

Senior Subordinated Convertible Debt

To finance a portion of the acquisition of two distribution centers in 2005, we sold $150.1 million in aggregate issue price (or $322.0 million aggregate principal amount at maturity) of senior subordinated convertible notes due in 2035.  The notes are unsecured senior subordinated obligations and rank junior to our existing and future senior indebtedness, including borrowings under our Revolving Credit Facility. 

Cash interest at the rate of 3.50% per year is payable semi-annually on the issue price of the notes until March 15, 2013.  After that date, cash interest will not be payable, unless contingent cash interest becomes payable, and original issue discount for non-tax purposes will accrue on the notes at a daily rate of 3.50% per year until the maturity date of the notes.  On the maturity date of the notes, a holder will receive $1,000 per note (a “$1,000 Note”).  Contingent cash interest will be paid on the notes during any six-month period, commencing March 16, 2013, if the average market price of a note for a ten trading day measurement period preceding the applicable six-month period equals 130% or more of the accreted principal amount of the note, plus accrued cash interest, if any.  The contingent cash interest payable with respect to any six-month period will equal an annual rate of 0.25% of the average market price of the note for the ten trading day measurement period described above.

The notes will be convertible at the option of the holder only upon the occurrence of certain events summarized as follows:

(1) if the closing price of our stock reaches a specified threshold (currently $62.32) for a specified period of time,

(2) if the notes are called for redemption,

(3) if specified corporate transactions or distributions to the holders of our common stock occur,

(4) if a change in control occurs or,

(5) during the ten trading days prior to, but not on, the maturity date.

Upon conversion by the holder, the notes convert at an adjusted conversion rate of 9.7224 shares (initially 9.3120 shares) of our common stock per $1,000 Note (equal to an adjusted conversion price of approximately $47.94 per share).  Upon conversion, we will pay the holder the conversion value in cash up to the accreted principal amount of the note and the excess conversion value (or residual value shares), if any, in cash, stock or both, at our option.  The conversion rate is adjusted upon certain dilutive events as described in the indenture, but in no event shall the conversion rate exceed 12.7109 shares per $1,000 Note.  The number of residual value shares cannot exceed 7.1469 shares per $1,000 Note.

We may redeem all or a portion of the notes for cash at any time on or after the eighth anniversary of the issuance of the notes.  Holders may require us to purchase for cash all or a portion of their notes on the 8th, 10th, 15th, 20th and 25th anniversaries of the issuance of the notes.  In addition, upon specified change in control events, each holder will have the option, subject to certain limitations, to require us to purchase for cash all or any portion of such holder’s notes.

                Notes Payable and Mortgage Notes

                On May 18, 2012, the Company, as guarantor for U Save Foods, Inc., a Nebraska corporation and wholly-owned subsidiary of Nash Finch Company, entered into a seven year $16.9 million term loan facility (“the Agreement”) with First National Bank of Omaha.  The Agreement is secured by seven corporate-owned retail locations in Nebraska.  At December 29, 2012, land in the amount of approximately $14.9 million and buildings and other assets with a depreciated cost of approximately $7.8 million are pledged to secure obligations under this term loan facility.

Maturities of Long-term Debt

Aggregate annual maturities of long‑term debt for the five fiscal years after December 29, 2012, are as follows (in thousands):

2013	$	-
2014		374
2015		748
2016		748
2017		189,573
Thereafter		164,808
Total	$	356,251

Interest paid was $18.2 million, $15.8 million and $16.6 million during fiscal 2012, fiscal 2011 and fiscal 2010, respectively.