16. Long Term Debt

Revolving credit facility

In September 2004, the Group entered into an unsecured $390.0 million multi-currency revolving credit facility with a syndicate of banks for a period of five years at a variable interest rate and at a maximum margin of 0.55 per cent above LIBOR. From commencement, the applicable margin has been 0.40 per cent above LIBOR. At 2 February 2008 and at 3 February 2007 the amount outstanding under this facility was $nil.

Commitment fees are paid on the undrawn portion of this credit facility at a rate of 40.0 per cent of the applicable margin. The principal financial covenants on this facility, calculated in accordance with IFRS, are as follows:

– the ratio of Consolidated Net Debt (cash and cash equivalents less borrowings falling due within one year and borrowings falling due in more than one year) to Consolidated EBITDA (Earnings Before Interest, Tax, Depreciation & Amortization) shall not exceed 3:1;

– consolidated Net Worth (total net assets) must not fall below £400 million; and

– the ratio of Consolidated EBITARR (Earnings Before Interest, Tax, Amortization, Rents, Rates and Operating Lease Expenditure) to Consolidated Net Interest Expenditure plus Rents, Rates and Operating Lease Expenditure shall be equal to or greater than 1.4:1.

US private placement

On 30 March 2006 the Group entered into a US Private Placement Note Term Series Purchase Agreement, ("US Private Placement") which was funded largely from US insurance institutional investors in the form of fixed rate investor certificate notes ("Notes"). These Notes represent 7, 10 or 12 year maturities. Interest on the Notes is payable semiannually with the face value payable at time of maturity, accordingly there are no repayments on the Notes due in the next five years. The Series A Notes are $100.0 million at face value, bear interest at 5.95 per cent and are due in May 2013; Series B Notes are $150.0 million at face value, bear interest at 6.11 per cent and are due in May 2016 and Series C Notes are $130.0 million at face value, bear interest at 6.26 per cent and are due in May 2018. The aggregate issuance was at face value for $380.0 million and the funding date was 23 May 2006. The proceeds from this debt issuance were used to refinance the maturing receivable securitization program and for general corporate purposes. The Notes rank pari passu with the Group's other senior unsecured debt, of which there is currently none. The principal financial covenants are in line with the Revolving Credit Facility as described above. Debt issuance costs were $2.0 million.

Conduit securitization facility ("Conduit")

On 26 October 2007 the Group entered into a 364 day $200 million Conduit. Under this securitization, interests in the US private label credit card receivables portfolio held by a trust would be sold to Bryant Park, a Conduit administered by HSBC Securities (USA) Inc., in the form of a secured revolving variable rate certificate. The Conduit bears interest at a margin of 0.22 per cent above the cost of funds paid by Bryant Park and commitment fees are paid on the undrawn portion at a rate of 0.12 per cent. At 2 February 2008 no receivable interests have been placed in trust for sale. Accordingly, the amount outstanding under the Conduit was $nil.

Receivable Securitization

In the US, in November 2001, the Group entered into a five year credit card receivable securitization program. Under this program, all eligible revolving credit card accounts originating from sales to customers under the Group's private label credit plans were sold on an on-going basis to Sterling Jewelers Receivable Corp ("SJRC"), a wholly owned, consolidated, special-purpose subsidiary. The receivable accounts were subsequently transferred to Sterling Jewelers Receivables Master Note Trust ("Trust"), an unconsolidated, qualifying, special-purpose entity, in exchange for: (a) the aggregate proceeds of $251,000 derived from the initial sale to outside investors of fixed rate Class A, Class B and Class C asset-backed notes; (b) a non-interest bearing, seller-retained, Class D note in the principal amount of $26,348; and (c) a Transferor's certificate representing the residual undivided beneficial interest in the assets of the Trust. Throughout the revolving period of the program, which ended on 20 February 2006, principal collections attributable to the receivables were retained by the trust until the $251,000 principal amount of the outside investors' notes was accumulated. The repayment of the notes occurred in November 2006 and is included as repayment of long term debt in the financing activities section of the Statement of Cash Flows. Finance charge collections derived from the receivables owned by the Trust were used to fund monthly interest payments to the note holders, absorb defaulted receivables and pay a monthly servicer's fee to the Group. Residual finance charge collections were released monthly to SJRC. The notes had a weighted average fixed interest rate of 5.42 per cent and interest was payable monthly in arrears.

The Group's retained interests in the receivables transferred to the Trust that were attributable to the subordinated Class D note and the Transferor's certificate were included in accounts receivable in the consolidated balance sheets. The Group periodically measured the fair value of the retained interests using management's best estimate of the expected future cash collections from the transferred receivables. Actual cash collections could have been different from these estimates and would have directly affected the fair value of the retained interests. Sterling Jewelers Inc. serviced, administered, and collected the receivables. The trust and note holders had no recourse to the Group's other assets for failure of the debtors to pay when due.

Cash flows between the Trust and the Group for the years ended 3 February 2007 and 26 January 2006 were as follows:

The weighted average interest rate on other loans and overdrafts during the year was 5.3 per cent (2006/07: 5.4 per cent; 2005/06: 4.3 per cent)