19. Loans, overdrafts and long-term debt


(in millions)	August 2, 2014		February 1, 2014		August 3, 2013
Current liabilities – loans and overdrafts:
Revolving credit facility	$	—	$	—	$	—
Current portion of term loan		20.0		—		—
Current portion of capital lease obligations		1.1		—		—
Bank overdrafts		10.1		19.3		1.7

Total loans and overdrafts		31.2		19.3		1.7
Long-term debt:
Senior notes, net of unamortized discount		398.4		—		—
Securitization facility		600.0		—		—
Term loan		380.0		—		—
Capital lease obligations		0.7		—		—

Total long-term debt		1,379.1		—		—

Total loans, overdrafts and long-term debt	$	1,410.3	$	19.3	$	1.7

Credit facility

In May 2011, Signet entered into a $400 million senior unsecured multi-currency five year revolving credit facility agreement (the “Credit Facility”).

There were no amounts outstanding under this Credit Facility as of February 1, 2014 and August 3, 2013. Signet had stand-by letters of credit on this Credit Facility of $10.1 million and $9.5 million as of February 1, 2014 and August 3, 2013, respectively. As of February 1, 2014 and August 3, 2013, the Company was in compliance with all debt covenants.

On May 27, 2014, the Credit Facility was amended in conjunction with the issuance of the new term loan. See “New term loan and amended revolving credit agreement” below. Capitalized amendment fees of $0.7 million relating to the Credit Facility agreement signed in May 2011 were written-off in the 13 week period ended August 2, 2014 upon executing the amended credit agreement in May 2014 (26 weeks ended August 2, 2014: $0.9 million).

On February 19, 2014, Signet entered into a definitive agreement to acquire Zale Corporation and concurrently received commitments for an $800 million 364-day unsecured bridge facility to finance the transaction. The bridge facility contained customary fees and incurred interest on any borrowings drawn on the facility. In May 2014, Signet executed its Zale acquisition financing as described below in Note 20, replacing the bridge facility commitments in addition to amending its Credit Facility, issuing senior unsecured notes and securitizing credit card receivables. No amounts were drawn on the bridge facility commitments prior to replacement and fees of $4.0 million were incurred and capitalized. This agreement was subsequently replaced by the issuances of the long-term debt listed below, and therefore during the 13 weeks ended August 2, 2014, the remaining $3.2 million was recorded as interest expense in the condensed consolidated income statement (26 weeks ended August 2, 2014: $4.0 million).

Issuance of senior unsecured notes due 2024

On May 19, 2014, Signet UK Finance plc (“Signet UK Finance”), a wholly owned subsidiary of the Company, issued $400 million aggregate principal amount of its 4.700% senior unsecured notes due in 2024 (the “Notes”). The Notes were issued under an effective registration statement previously filed with the SEC. Interest on the notes is payable semi-annually on June 15 and December 15 of each year, commencing December 15, 2014. The Notes are jointly and severally guaranteed, on a full and unconditional basis, by the Company and by certain of the Company’s wholly owned subsidiaries (such subsidiaries, the “Guarantors”). The Notes were issued pursuant to a base indenture among the Company, Signet UK Finance, the Guarantors and Deutsche Bank Trust Company Americas as trustee, with the indenture containing customary covenants and events of default provisions. The Company received proceeds from the offering of approximately $393.9 million, which were net of underwriting discounts, commissions and offering expenses.

Capitalized fees relating to the senior unsecured notes of $6.9 million were incurred, of which $5.7 million was paid and $1.2 million was accrued as of August 2, 2014. Amortization expense relating to these fees of $0.1 million was recorded as interest expense in the condensed consolidated income statements for the 13 and 26 weeks ended August 2, 2014.

Asset-backed securitization facility

On May 15, 2014, the Company sold an undivided interest in certain credit card receivables to Sterling Jewelers Receivables Master Note Trust (the “Issuer”), a wholly-owned Delaware statutory trust and a wholly-owned indirect subsidiary of the Company and issued two-year revolving asset-backed variable funding notes to an unrelated third party conduit pursuant to a master indenture dated as of November 2, 2001, as supplemented by the Series 2014-A indenture supplement dated as of May 15, 2014 among the Issuer, Sterling Jewelers Inc. (“SJI”) and Deutsche Bank Trust Company Americas, the indenture trustee. Under terms of the notes, the Issuer has obtained $600 million of financing from the unrelated third party commercial paper conduits sponsored by JPMorgan Chase Bank, N.A., which indebtedness is secured by credit card receivables originated from time to time by SJI. The credit card receivables will ultimately be transferred to the Issuer and are serviced by SJI. Signet guarantees the performance by SJI of its obligations under the agreements associated with this financing arrangement. Borrowings under the asset-backed variable funding notes will bear interest at a rate per annum equal to LIBOR plus an applicable margin.

Capitalized fees relating to the asset-backed securitization facility of $2.8 million were incurred, of which $2.3 million was paid and $0.5 million was accrued as of August 2, 2014. Amortization expense relating to these fees of $0.2 million was recorded as interest expense in the condensed consolidated income statements for the 13 and 26 weeks ended August 2, 2014.

New term loan and amended revolving credit agreement

On May 27, 2014, Signet amended and restated its existing credit agreement to (i) add a new $400 million term loan facility and (ii) amend its existing revolving credit facility. The new term loan facility is a $400 million 5-year senior unsecured facility with JPMorgan Chase Bank, N.A., acting as administrative agent. Signet simultaneously amended and restated its existing revolving credit facility extending the maturity date to 2019. Borrowings under each of the term loan facility and the amended revolving credit facility will bear interest at a rate per annum equal to an applicable margin, plus, at Signet’s option, either (a) a base rate or (b) a LIBOR rate. The amended and restated credit agreement provides that Signet may voluntarily repay outstanding loans at any time without premium or penalty other than reimbursement of the lender’s redeployment and breakage costs in certain cases.

Signet will be required to make scheduled quarterly payments commencing on November 1, 2014 equal to the amounts per annum of the original principal amount of the term loan as follows: 5% in the first year, 7.5% in the second year, 10% in the third year, 12.5% in the fourth year and 15% in the fifth year after the initial payment date, with the balance due on May 27, 2019.

The amended and restated credit agreement contains various customary representatives and warranties, financial reporting requirements and other affirmative and negative covenants. As with Signet’s prior credit facility, Signet will be required to maintain at all times a leverage ratio of no greater than 2.50 to 1.00 and a fixed charge coverage ratio of no less than 1.40 to 1.00, both determined as of the end of each fiscal quarter of Signet for the trailing twelve months.

As of August 2, 2014, $400 million was drawn on the new term loan facility. In addition, there were no borrowings drawn on the amended revolving credit facility, with no intra-period borrowings. Signet had stand-by letters of credit of $20.3 million as of August 2, 2014.

Capitalized fees relating to the new term loan and amended revolving credit agreement of $6.6 million were incurred, of which $6.4 million was paid and $0.2 million was accrued as of August 2, 2014. Amortization expense relating to these fees of $0.3 million was recorded as interest expense in the condensed consolidated income statements for the 13 and 26 weeks ended August 2, 2014.

As of August 2, 2014, the Company was in compliance with all debt covenants.

Other

At August 2, 2014, February 1, 2014 and August 3, 2013, there were $10.1 million, $19.3 million and $1.7 million in overdrafts, which represent issued and outstanding checks where no bank balances exist with the right of offset.

Capital Lease Obligations

In the Zale division, capital leases are entered into related to vehicles for field management. The vehicles are included in property, plant and equipment in the accompanying condensed consolidated balance sheets and are depreciated over a four-year life. Capital leases, net of accumulated depreciation, included in property, plant and equipment as of August 2, 2014 totaled $1.7 million. The Acquisition occurred on May 29, 2014, and therefore amounts are not included as of February 1, 2014 or August 3, 2013.