LONG-TERM DEBT

6 Months Ended

Jun. 29, 2013

5. LONG-TERM DEBT

Long-term debt consisted of the following at June 29, 2013 and December 29, 2012 (in thousands):

	June 29,		December 29,
	2013		2012
Holding Corp.
Senior secured asset-based credit facility	$	60,000	$	-
Senior secured term loan facility, net of unamortized discount of $5,554 at June 29, 2013 and $6,201 at December 29, 2012		648,821		648,174
Senior notes due 2015		-		10,000
Senior subordinated notes due 2017		188,000		188,000
Total Holding Corp.		896,821		846,174
Senior PIK notes due 2016, net of unamortized discount of $3,739 at June 29, 2013 and $4,334 at December 29, 2012		311,261		310,666
Total YCC Holdings	$	1,208,082	$	1,156,840

Term Loan Facility

The Senior Secured Term Loan Facility (the "Term Loan Facility") matures on April 2, 2019; however, the maturity date of the Term Loan Facility will accelerate if the senior subordinated notes due 2017 (the "Senior Subordinated Notes") and the senior PIK notes due 2016 ("Senior PIK Notes") are not defeased, repurchased, refinanced or redeemed 91 days prior to their respective maturity dates. The Term Loan Facility is payable in quarterly principal payments of $1.8 million with the balance due at maturity. However, at the end of 2012, the Company made a principal payment of $67.0 million; as a result of the payment, no quarterly principal payments are due on the Term Loan Facility through its maturity and no amounts are classified as current in the accompanying condensed consolidated balance sheets. Amounts repaid under the Term Loan Facility cannot be reborrowed. As of June 29, 2013, the Term Loan Facility had outstanding borrowings of $654.4 million.

Interest is payable on the Term Loan Facility at either (i) the Eurodollar Rate (subject to a 1.25% floor) plus 4.00% or (ii) the ABR (subject to a 2.25% floor) plus 3.00%. The default rate of interest will accrue (i) on the overdue principal amount of any loan at a rate of 2% in excess of the rate otherwise applicable to such loan and (ii) on any overdue interest or any other outstanding overdue amount at a rate of 2% in excess of the non-default interest rate then applicable to ABR loans. As of June 29, 2013, the interest rate applicable to the Term Loan Facility was 5.25%.

Yankee Candle's Term Loan Facility contains a financial covenant which requires that Yankee Candle maintain at the end of each fiscal quarter, commencing with the quarter ended December 29, 2012 through the quarter ending September 28, 2013, a consolidated net debt (net of cash and cash equivalents not to exceed $75.0 million) to Consolidated EBITDA ratio of no more than 7.00 to 1.00. As of June 29, 2013, Yankee Candle's actual net total leverage ratio was 4.53 to 1.00, as defined in the Term Loan Facility. As of June 29, 2013, total Holding Corp. debt (including Yankee Candle's capital lease obligations of $4.7 million and net of $3.8 million in cash) was approximately $903.3 million. Under Yankee Candle's Term Loan Facility, Consolidated EBITDA is defined as net income plus, interest, taxes, depreciation and amortization, further adjusted to add back extraordinary, unusual or non-recurring losses, non-cash stock option expense, fees and expenses related to the Merger, fees and expenses under the Management Agreement with our equity sponsor, restructuring charges or reserves, as well as other non-cash charges, expenses or losses, and further adjusted to subtract extraordinary, unusual or non-recurring gains, other non-cash income or gains, and certain cash contributions to our common equity.

Asset-Based Credit Facility

The Senior Secured Asset-Based Credit Facility (the "ABL Facility") expires on April 2, 2017; however, the expiration date of the ABL Facility will accelerate if the Senior Subordinated Notes and the Senior PIK Notes are not defeased, repurchased, refinanced or redeemed 91 days prior to their respective maturity dates. The ABL Facility permits revolving borrowings of up to $175.0 million subject to eligible inventory and eligible accounts receivable balances. The ABL Facility is inclusive of sub-facilities for up to $25.0 million in swing line advances, up to $25.0 million for letters of credit, up to $10.0 million for borrowings by Yankee Candle's Canadian subsidiary, up to $10.0 million for borrowings by Yankee Candle's German subsidiary and up to $75.0 million for borrowing by Yankee Candle's wholly-owned subsidiary Yankee Candle (Europe), LTD ("YCE"). Borrowings under the ABL Facility bear interest at a rate equal to either (i) LIBOR or the BofA rate plus the applicable margin or (ii) the prime rate plus the applicable margin. The applicable margin ranges from 0.50% to 2.00%, dependent on the currency of the borrowing. For purposes of determining interest rates, the applicable margin is subject to a variable grid, dependent on average daily excess availability calculated as of the immediately preceding fiscal quarter. As of June 29, 2013 the interest rate applicable to the ABL Facility was 1.75%.

The unused line fee payable under the ABL Facility is equal to (i) 0.50% per annum if less than 50% of the ABL Facility has been used on average during the immediately preceding fiscal quarter or (ii) 0.375% per annum if 50% or more of the ABL Facility has been utilized on average during the immediately preceding fiscal quarter.

The ABL Facility requires Yankee Candle and its subsidiaries to maintain a consolidated fixed charge coverage ratio of at least 1.0:1.0 during a covenant compliance event, which occurs if unused borrowing availability is less than the greater of (x) 10% of the maximum amount that can be borrowed under the ABL Facility, which amount is the lesser of $175.0 million and a borrowing formula based on eligible receivables and inventory (the "ABL Loan Cap") and (y) $15.0 million and continues until excess availability has exceeded the amounts set forth herein for 30 consecutive days. As of June 29, 2013, the ABL Loan Cap was $88.2 million. As of June 29, 2013, Yankee Candle had outstanding letters of credit of $2.5 million and $60.0 million outstanding under the ABL Facility resulting in available borrowing capacity of $25.7 million, or 29.2% of the Loan Cap. As such, Yankee Candle was not subject to the fixed charge coverage ratio.

Senior Notes and Senior Subordinated Notes

In April 2012, $315.0 million of Yankee Candle's Senior Notes due 2015 ("Senior Notes") were redeemed in connection with the refinancing of the senior secured credit facility ("Senior Secured Credit Facility"). During the first quarter of 2013, Yankee Candle redeemed the remaining $10.0 million in aggregate principal amount of its Senior Notes at par. As all of the Senior Notes have been redeemed, the obligations of Yankee Candle and the guarantors under the related indenture have been discharged.

Yankee Candle's senior subordinated notes due 2017 bear interest at a per annum rate equal to 9.75%. Interest is paid every six months on February 15 and August 15. The senior subordinated notes mature on February 15, 2017. The indenture governing the senior subordinated notes restricts the ability of Holding Corp., Yankee Candle and most or all of Yankee Candle's subsidiaries to: incur additional debt; pay dividends or make other distributions on the Company's capital stock or repurchase capital stock or subordinated indebtedness; make investments or other specified restricted payments; create liens; sell assets and subsidiary stock; enter into transactions with affiliates; and enter into mergers, consolidations and sales of substantially all assets.

Obligations under the senior subordinated notes are guaranteed on an unsecured senior subordinated basis, by Holding Corp. and Yankee Candle's existing and future domestic subsidiaries. If Yankee Candle cannot make any payment on the senior subordinated notes, the guarantors must make the payment instead.

In the event of certain change in control events specified in the indentures governing the senior subordinated notes, Yankee Candle must offer to repurchase all or a portion of such notes at 101% of the principal amount of the such notes on the date of purchase, plus any accrued and unpaid interest to the date of repurchase.

Senior PIK Notes - YCC Holdings

In February 2011, YCC Holdings and Yankee Finance co-issued $315.0 million of Senior PIK Notes pursuant to an indenture at a discount of $6.3 million for net proceeds of $308.7 million. Cash interest on the Senior PIK Notes accrues at a rate of 10.25% per annum, and PIK Interest (defined below) accrues at the cash interest rate plus 0.75%. YCC Holdings is required to pay interest on the Senior PIK Notes entirely in cash interest, unless the conditions described in the indenture are satisfied with respect to the related interest period, in which case, YCC Holdings may pay interest on the Senior PIK Notes for such interest period by increasing the principal amount of the Senior PIK Notes or by issuing new PIK Notes for up to the entire amount of the interest payment (in each case, "PIK Interest") to the extent described in the related indenture.

YCC Holdings is indirectly dependent upon dividends from Yankee Candle to generate the funds necessary to meet its outstanding debt service obligations. Neither Yankee Candle nor Holding Corp. guarantees the Senior PIK Notes. Yankee Candle is not obligated to pay dividends to Holding Corp. and Holding Corp. is not obligated to pay dividends to YCC Holdings. Yankee Candle's ability to pay dividends to Holding Corp. to permit Holding Corp. to pay dividends to YCC Holdings was restricted at June 29, 2013 by A) Yankee Candle's Term Loan Facility, B) Yankee Candle's ABL Facility and C) the indenture governing the Senior Subordinated Notes. Because the Term Loan Facility, ABL Facility and the indenture governing Yankee Candle's senior subordinated notes each contain limitations on dividends, Yankee Candle is permitted to make dividends only to the extent it is permitted to do so at the time the dividend is made under each of these agreements. For a more detailed description of these restrictions reference our most recently issued Form 10-K.

During both of the twenty-six weeks ended June 29, 2013 and June 30, 2012, Holding Corp. declared and paid dividends of $16.2 million to YCC Holdings to fund interest payments for the Senior PIK Notes, which decreased the amount available for future dividends. At June 29, 2013, the amount available for dividends from Yankee Candle to YCC Holdings was approximately $152.1 million.

Holding Corp. receives the tax benefit of the interest expense for YCC Holdings' Senior PIK Notes. As such, for the twenty-six weeks ended June 29, 2013 and June 30, 2012, Holding Corp. recorded non-cash contributions of $6.4 million and $6.9 million, respectively, from YCC Holdings. The contributions for the twenty-six weeks ended June 29, 2013 and June 30, 2012 are shown as a contribution by YCC Holdings LLC in Holding Corp.'s respective consolidated statement of changes in stockholder's equity and in Holding Corp.'s non-cash financing section of the respective condensed consolidated statements of cash flows.

- Definition

The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants.

+ References+ Details

YCC Holdings LLC 10-Q