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Borrowings and Capital Lease Obligations
 6 Months Ended
Jul. 28, 2012
Borrowings and Capital Lease Obligations  
Borrowings and Capital Lease Obligations

(8)           Borrowings and Capital Lease Obligations

 

Borrowings and capital lease obligations are summarized as follows (in thousands):

 

 

 

July 28,
2012

 

Jan. 28,
2012

 

European capital lease, maturing quarterly through 2016

 

$

10,254

 

$

11,925

 

Other

 

185

 

311

 

 

 

10,439

 

12,236

 

Less current installments

 

1,720

 

2,030

 

Long-term capital lease obligations

 

$

8,719

 

$

10,206

 

 

The Company entered into a capital lease in December 2005 for a new building in Florence, Italy. At July 28, 2012, the capital lease obligation was $10.3 million. The Company entered into a separate interest rate swap agreement designated as a non-hedging instrument that resulted in a swap fixed rate of 3.55%. This interest rate swap agreement matures in 2016 and converts the nature of the capital lease obligation from Euribor floating rate debt to fixed rate debt. The fair value of the interest rate swap liability as of July 28, 2012 was approximately $0.9 million.

 

On July 6, 2011, the Company entered into a five-year senior secured revolving credit facility with JPMorgan Chase Bank, N.A., Bank of America, N.A. and the other lenders party thereto (the “Credit Facility”) which provided for a $200 million revolving multicurrency line of credit. The Credit Facility is available for direct borrowings and the issuance of letters of credit, subject to certain letters of credit sublimits. It may be used for working capital and other general corporate purposes.

 

On August 31, 2012, the Company increased its borrowing capacity under the Credit Agreement from $200 million to $300 million by exercising the accordion feature in the Credit Agreement pursuant to a Lender Joinder Agreement with the lenders party thereto. Also on August 31, 2012, the Company entered into an Amendment to the Credit Agreement with the lenders party thereto to provide for (i) greater flexibility in certain of the Company’s covenants under the Credit Agreement and (ii) access to a new $100 million accordion feature, subject to certain conditions and the willingness of existing or new lenders to assume such increased amount.  At July 28, 2012, the Company had $1.3 million in outstanding standby letters of credit, no outstanding documentary letters of credit and no outstanding borrowings under the Credit Facility.

 

The Company, through its European subsidiaries, maintains short-term uncommitted borrowing agreements, primarily for working capital purposes, with various banks in Europe. The majority of the borrowings under these agreements are secured by specific accounts receivable balances. Based on the applicable accounts receivable balances at July 28, 2012, the Company could have borrowed up to $158.9 million under these agreements. At July 28, 2012, the Company had no outstanding borrowings and $8.6 million in outstanding documentary letters of credit under these agreements. The agreements are denominated primarily in euros and provide for annual interest rates ranging from 0.5% to 3.1%. The maturities of any short-term borrowings under these arrangements are generally linked to the credit terms of the underlying accounts receivable that secure the borrowings. With the exception of one facility for up to $43.1 million that has a minimum net equity requirement, there are no other financial ratio covenants.

 

From time to time the Company will obtain other short-term financing in foreign countries for working capital to finance its local operations.