Debt

3 Months Ended

Mar. 31, 2012

Debt [Abstract]

Debt

Note 14—Debt

Debt was as follows:

		00000000000		00000000000		00000000000
	March 31, 2012		December 31, 2011		April 2, 2011
Short-term debt:
Current portion of 2011 Term Loan	$	2,000	$	2,000	$	—
CKJEA Notes payable and Other		58,701		43,021		38,309
2008 Credit Agreements		16,171		—		96,707
Premium on interest rate cap—current		2,571		2,492		—
Italian Note		—		—		11,407
		79,443		47,513		146,423
Long-term debt:
2011 Term Loan		196,500		197,000		—
Premium on interest rate cap		10,907		11,477		—
		207,407		208,477		—
Total Debt	$	286,850	$	255,990	$	146,423

2011 Term Loan Agreement

On June 17, 2011, Warnaco Group, Warnaco, Calvin Klein Jeanswear Company (“CK Jeans”), an indirect wholly-owned subsidiary of Warnaco Group, and Warnaco Swimwear Products Inc. (“Warnaco Swimwear”), an indirect wholly-owned subsidiary of Warnaco Group, entered into a term loan agreement (the “2011 Term Loan Agreement”) and the term loan thereunder (the “2011 Term Loan”) with the financial institutions which are the lenders thereunder (the “Lenders”). Warnaco, CK Jeans and Warnaco Swimwear are co-borrowers on a joint and several basis under the 2011 Term Loan Agreement (the “Borrowers”). The 2011 Term Loan matures on June 17, 2018. As of March 31, 2012, there was $198,500 in term loans outstanding under the 2011 Term Loan Agreement.

The 2011 Term Loan Agreement provides interest rate options, at the Borrowers’ election, including a base rate (as defined in the 2011 Term Loan Agreement) plus a margin of 1.75% or at LIBOR (with a floor of 1.00%) plus a margin of 2.75%, in each case, on a per annum basis. At March 31, 2012 and December 31, 2011, the interest rate on the entire balance of the 2011 Term Loan was 3.75%, based on three-month LIBOR (with a floor of 1.00%) plus a margin of 2.75%.

Interest Rate Cap Agreement

On July 1, 2011, the Company entered into a deferred premium interest rate cap agreement with HSBC Bank USA (the “Counterparty”), effective July 29, 2011, on a notional amount of $120,000 (the “Interest Rate Cap Agreement”), which is a series of 27 individual caplets that reset and settle quarterly over the period from October 31, 2011 to April 30, 2018. The effect of the Interest Rate Cap Agreement is to limit the interest rate payable on average over the term of the Interest Rate Cap Agreement to 5.6975% per annum with respect to the portion of the 2011 Term Loan that equals the notional amount of the Interest Rate Cap Agreement.

The interest rate cap contracts are designated as cash flow hedges of the exposure to variability in expected future cash flows attributable to a three-month LIBOR rate beyond 1.00%. At the inception of the hedging relationship, the fair value of the Interest Rate Cap Agreement of $14,395 was allocated to the respective caplets within the Interest Rate Cap Agreement on a fair value basis. To the extent that the interest rate cap contracts are effective in offsetting that variability, changes in the Interest Rate Cap Agreement’s fair value will be recorded in AOCI in the Company’s Consolidated Condensed Balance Sheets and subsequently recognized in interest expense in the Consolidated Condensed Statements of Operations as the underlying interest expense is recognized on the 2011 Term Loan.

On March 31, 2012 and December 31, 2011, the fair value of the Interest Rate Cap Agreement was $6,047 and $6,276, respectively, which was recorded in Other assets. On March 31, 2012, Deferred premium on the Interest Rate Cap Agreement was $13,478, of which $2,571 was recorded in Short-term debt and $10,907 was recorded in Long-term debt. On December 31, 2011, Deferred premium on the Interest Rate Cap Agreement was $13,969, of which $2,492 was recorded in Short-term debt and $11,477 was recorded in Long-term debt.

A reconciliation of the balance of AOCI during the Three Months Ended March 31, 2012 related to the Interest Rate Cap Agreement is as follows:

		0000000000
Balance December 31, 2011, net of tax	$	(4,848	)
Change in fair value of interest rate cap		(229	)
Initial fair value of maturing caplets		7
Balance March 31, 2012, pre-tax		(5,070	)
Tax effect		90
Balance March 31, 2012, net of tax	$	(4,980	)

Interest expense recognized on the Interest Rate Cap Agreement during the Three Months Ended March 31, 2012 is as follows:

		0000000000
Interest Expense
Initial fair value of maturing caplets	$	7
Accretion of deferred premium		106
Total	$	113

2008 Credit Agreements

On August 26, 2008, Warnaco, as borrower, and Warnaco Group, as guarantor, entered into a revolving credit agreement (the “2008 Credit Agreement”) and Warnaco of Canada Company, an indirect wholly-owned subsidiary of Warnaco Group, as borrower, and Warnaco Group, as guarantor, entered into a second revolving credit agreement (the “2008 Canadian Credit Agreement” and, together with the 2008 Credit Agreement, the “2008 Credit Agreements”), in each case with the financial institutions which, from time to time, will act as lenders and issuers of letters of credit. On June 17, 2011 and November 8, 2011, the 2008 Credit Agreements were amended (see Note 12 of Notes to Consolidated Financial Statements in the Company’s Annual Report on Form 10-K for Fiscal 2011).

As of March 31, 2012, the 2008 Credit Agreement had interest rate options (dependent on the amount borrowed and the repayment period) of (i) 3.75%, based on a base rate plus 0.50%, or (ii) 1.97%, based on LIBOR plus 1.50%. The 2008 Canadian Credit Agreement had interest rate options of (i) 3.50%, based on the prime rate announced by Bank of America (acting through its Canada branch) plus 0.50%, or (ii) 2.67%, based on the BA Rate (as defined below), in each case, on a per annum basis. The BA Rate is defined as the annual rate of interest quoted by Bank of America (acting through its Canada branch) for bankers’ acceptances in Canadian dollars for a face amount similar to the amount of the loan and for a term similar to the applicable interest period.

As of March 31, 2012, the Company had $16,171 of loans and approximately $32,205 in letters of credit outstanding under the 2008 Credit Agreement, leaving approximately $179,651 of availability. As of March 31, 2012, there were no loans and $3,462 in letters of credit outstanding under the 2008 Canadian Credit Agreement and the available line of credit was approximately $19,204.

CKJEA Notes and Other Short-Term Debt

One of the Company’s European businesses holds short-term notes payable (the “CKJEA Notes”). The total amounts of CKJEA Notes payable of $44,190 at March 31, 2012, $36,648 at December 31, 2011 and $29,236 at April 2, 2011 each consist of short-term revolving notes with a number of banks at various interest rates (primarily Euro LIBOR plus 1.0%). The weighted average effective interest rate for the outstanding CKJEA Notes payable was 3.49% as of March 31, 2012, 4.00% as of December 31, 2011 and 2.24% as of April 2, 2011. All of the CKJEA Notes payable are short-term and were renewed during the Three Months Ended March 31, 2012 for additional terms of no more than 12 months.

In addition, as of March 31, 2012, December 31, 2011 and April 2, 2011, the Company’s Brazilian subsidiary, WBR, had lines of credit with several banks, with total outstanding balances of $557, $6,373 and $9,073, respectively, recorded in Short-term debt in the Company’s Consolidated Condensed Balance Sheets or Consolidated Balance Sheets, which were secured by approximately equal amounts of WBR’s trade accounts receivable. In addition, as of March 31, 2012, WBR has outstanding short-term loans with several Brazilian banks totaling $13,954, with a weighted average interest rate of 11.69%.

During September 2011, one of the Company’s Asian subsidiaries entered into a short-term $25,000 revolving credit facility with one lender (the “Asian Credit Facility”) to be used for working capital and general corporate purposes. The Asian Credit Facility bears interest of 1.75% over one-month LIBOR, which is due monthly. At the end of each month, amounts outstanding under the Asian Credit Facility may be carried forward for further one-month periods for up to one year. The Asian Credit Facility may be renewed annually. The Asian Credit Facility is subject to certain terms and conditions customary for a credit facility of this type and may be terminated at any time at the discretion of the lender. There were no borrowings as of December 31, 2011 or March 31, 2012 or during the Three Months Ended March 31, 2012.

Italian Note

On September 30, 2010, one of the Company’s Italian subsidiaries entered into a €10,000 loan (the “Italian Note”). As of April 2, 2011, the principal balance of the Italian Note was €8,020 (equal to approximately $11,407 on that date) with an annual interest rate of 3.72%. On June 30, 2011, the Company repaid the full outstanding balance of €6,040 (equal to approximately $8,600 on that date) on the Italian Note with a portion of the proceeds of the 2011 Term Loan (see above).