SALE-LEASEBACK AND MORTGAGE REPAYMENT

6 Months Ended

Aug. 01, 2015

SALE-LEASEBACK AND MORTGAGE REPAYMENT

SALE-LEASEBACK AND MORTGAGE REPAYMENT

8.SALE-LEASEBACK AND MORTGAGE REPAYMENT

On June 26, 2015, the Company entered into a sale-leaseback arrangement with an unrelated party. Under the arrangement, the Company sold six retail department stores for $84,000 and leased them back for a period of 20 years with three optional 10-year renewal terms. The basic rent payable in connection with the lease is $6,888 per year, subject to annual adjustments for increases in the Consumer Price Index with a 2% minimum increase and a 4% maximum increase each year.

The leaseback has been accounted for as a capital lease, and the Company recorded a capital lease asset and obligation of $88,229 at the beginning of the lease term.  The loss of $1,971 on this transaction has been deferred and will be amortized to expense over the term of the lease.

Proceeds from the sale-leaseback transaction, supplemented with borrowings under the Company’s senior secured credit facility, were used to pay the remaining principal balance of $104,538 on one of the two mortgage facilities due in April 2016. As a result of such prepayment, the Company paid an early termination fee of $4,741. Unamortized deferred financing fees of $121 were accelerated on the date of the termination. Fees paid and deferred financing fees accelerated were recognized in loss on extinguishment of debt.