2. Long-term debt

A summary of the Company’s consolidated Long-term debt as of October 29, 2011, January 29, 2011 and October 30, 2010 is outlined in the table below:



(In millions)	October 29, 2011		January 29, 2011		October 30, 2010
7.625% notes, due fiscal 2011 (1)(2)	$	—	$	503	$	504
Toys-Japan 1.85%-2.85% loans due fiscals 2012-2016 (3)	190		177		180
French real estate credit facility, due fiscal 2012	87		84		86
Spanish real estate credit facility, due fiscal 2012	180		175		180
U.K. real estate senior credit facility, due fiscal 2013	562		555		562
U.K. real estate junior credit facility, due fiscal 2013	98		97		98
7.875% senior notes, due fiscal 2013 (1)	397		396		396
Toys-Japan unsecured credit lines, expire fiscals 2012-2013 (5)	95		17		141
Secured revolving credit facility, expires fiscal 2015 (4)	750		—		520
European and Australian asset-based revolving credit facility, expires fiscal 2016 (6)	65		—		26
Secured term loan facility, due fiscal 2016 (4)	684		687		689
7.375% senior secured notes, due fiscal 2016 (4)	362		348		350
10.750% senior notes, due fiscal 2017 (7)	930		929		928
8.500% senior secured notes, due fiscal 2017 (8)	716		716		716
Incremental secured term loan facility, due fiscal 2018 (4)(9)	395		—		—
7.375% senior notes, due fiscal 2018 (1)	404		405		406
8.750% debentures, due fiscal 2021 (10)	22		22		22
Finance obligations associated with capital projects	133		123		113
Capital lease obligations	40		54		42
	6,110		5,288		5,959
Less current portion (11)	163		570		550
Total Long-term debt	$	5,947	$	4,718	$	5,409


⁽¹⁾	Represents obligations of Toys “R” Us, Inc. legal entity.


⁽²⁾	On June 24, 2011, we redeemed the 7.625% notes due fiscal 2011 (the "2011 Notes") with the net proceeds from a new tranche of term loans in an aggregate principal amount of $400 million ("Incremental Secured Term Loan") and borrowings from our secured revolving credit facility ("ABL Facility").


⁽³⁾	On February 28, 2011, Toys "R" Us - Japan, Ltd. ("Toys-Japan") entered into a bank loan with a financial institution totaling ¥1.0 billion ($13 million at October 29, 2011).


⁽⁴⁾	Represents obligations of Toys “R” Us-Delaware, Inc. (“Toys–Delaware”).


⁽⁵⁾	On March 18, 2011, Toys-Japan entered into an agreement to refinance, at maturity, Tranche 2 of its committed lines of credit to extend the maturity date of the agreement and amend certain other provisions.


⁽⁶⁾	On March 8, 2011, certain of our foreign subsidiaries amended and restated the credit agreement to extend the maturity date of the facility and amend certain other provisions.


⁽⁷⁾	Represents obligations of Toys “R” Us Property Company I, LLC (“TRU Propco I”), and its subsidiaries.


⁽⁸⁾	Represents obligations of Toys “R” Us Property Company II, LLC (“TRU Propco II”).

⁽⁹⁾

On May 25, 2011, Toys-Delaware and certain of its subsidiaries issued the Incremental Secured Term Loan. Pursuant to the terms of the agreement, Toys-Delaware is required to make quarterly principal payments equal to 0.25% (approximately $4 million per year) of the original principal amount of the loan. As such, this amount has been classified as Current portion of Long-term debt on our Condensed Consolidated Balance Sheet as of October 29, 2011.


⁽¹⁰⁾	Represents obligations of Toys “R” Us, Inc. and Toys–Delaware.

⁽¹¹⁾

Current portion of Long-term debt as of October 29, 2011 is primarily comprised of $95 million of Toys-Japan unsecured credit lines expiring on June 29, 2012 and $37 million of our Toys-Japan 1.85%-2.85% loans ("Toys-Japan bank loans"). Current portion of Long-term debt as of January 29, 2011 and October 30, 2010 is primarily comprised of $503 million and $504 million of the 2011 Notes, respectively, which were redeemed on June 24, 2011.

Toys “R” Us, Inc. is a holding company and conducts its operations through its subsidiaries, certain of which have incurred their own indebtedness. Our credit facilities, loan agreements and indentures contain customary covenants, including, among other things, covenants that restrict our and our subsidiaries’ abilities to:


•	incur certain additional indebtedness;


•	transfer money between the parent company and our various subsidiaries;


•	pay dividends on, repurchase or make distributions with respect to our or our subsidiaries’ capital stock or make other restricted payments;


•	issue stock of subsidiaries;


•	make certain investments, loans or advances;


•	transfer and sell certain assets;


•	create or permit liens on assets;


•	consolidate, merge, sell or otherwise dispose of all or substantially all of our assets;


•	enter into certain transactions with our affiliates; and


•	amend certain documents.

The amount of net assets that were subject to such restrictions was approximately $494 million as of October 29, 2011. Our agreements also contain various and customary events of default with respect to the loans, including, without limitation, the failure to pay interest or principal when the same is due under the agreements, cross default provisions, the failure of representations and warranties contained in the agreements to be true and certain insolvency events. If an event of default occurs and is continuing, the principal amounts outstanding thereunder, together with all accrued unpaid interest and other amounts owed thereunder, may be declared immediately due and payable by the lenders.

We are dependent on the borrowings provided by the lenders to support our working capital needs and capital expenditures. As of October 29, 2011, we have funds available to finance our operations under our European and Australian asset-based revolving credit facility through March 2016, our ABL Facility through August 2015 and our Toys – Japan unsecured credit lines with a Tranche maturing June 2012 and a Tranche maturing June 2013. If our cash flow and capital resources do not provide the necessary liquidity, it could have a significant negative effect on our results of operations.

The total fair values of our Long-term debt, with carrying values of approximately $6.1 billion, $5.3 billion and $6.0 billion at October 29, 2011, January 29, 2011 and October 30, 2010, were $6.1 billion, $5.4 billion and $6.1 billion, respectively. The fair values of our Long-term debt are estimated using the quoted market prices for the same or similar issues and other pertinent information available to management at the end of the respective periods.

Toys-Japan Unsecured Credit Lines, expires fiscals 2012 - 2013 ($95 million at October 29, 2011)

Toys—Japan currently has an agreement with a syndicate of financial institutions, which includes two unsecured loan commitment lines of credit (“Tranche 1” and “Tranche 2”). Under the agreement, Tranche 1 is available in amounts of up to ¥14.9 billion ($196 million at October 29, 2011), which expires on June 30, 2013, and bears an interest rate of Tokyo Interbank Offered Rate (“TIBOR”) plus 0.90% per annum. At October 29, 2011, we had no outstanding borrowings under Tranche 1.

On March 18, 2011, Toys-Japan entered into an agreement with a syndicate of financial institutions to refinance Tranche 2. As a result, Tranche 2 is now available in amounts of up to ¥10.0 billion ($132 million at October 29, 2011), expiring on June 29, 2012, and bears an interest rate of TIBOR plus 0.80% per annum. We paid fees of $1 million to refinance Tranche 2, which are capitalized as deferred debt issuance costs and amortized over the term of the agreement. At October 29, 2011, we had outstanding borrowings of $95 million under Tranche 2, with $37 million of remaining availability.

The agreement contains covenants, including, among other things, covenants that require Toys – Japan to maintain a certain level of net assets and profitability during the agreement terms. The agreement also restricts Toys – Japan from paying dividends or making loans to affiliates without lender consent.

$1.85 billion ABL Facility, expires fiscal 2015 ($750 million at October 29, 2011)

At October 29, 2011, under our ABL Facility we had outstanding borrowings of $750 million, a total of $101 million of outstanding letters of credit and excess availability of $999 million. We are also subject to a minimum excess availability covenant, which was $125 million at October 29, 2011, with remaining availability of $874 million in excess of the covenant.

European ABL, expires fiscal 2016 ($65 million at October 29, 2011)

On March 8, 2011, certain of our foreign subsidiaries amended and restated the credit agreement for the European and Australian asset-based revolving credit facility (the “European ABL”) in order to extend the maturity date of the facility and amend certain other provisions. The European ABL facility as amended provides for a five-year £128 million asset-based senior secured revolving credit facility which will expire on March 8, 2016. Additionally, on April 29, 2011, we partially exercised the accordion feature which increased availability to include additional lender commitments. This increased the size of the facility from £128 million to £138 million ($223 million at October 29, 2011). Loans under the European ABL bear interest at a rate of London Interbank Offered Rate (“LIBOR”) or the Euro Interbank Offered Rate (“EURIBOR”) plus a margin of 2.25%, 2.50% or 2.75% depending on historical excess availability. In addition, a commitment fee accrues on any unused portion of the commitments at a rate per annum of 0.375% or 0.50% based on usage. In connection with the amendment and restatement of the credit agreement, we incurred approximately $6 million in fees which are capitalized as deferred debt issuance costs and amortized over the term of the agreement.

Borrowings under the European ABL are subject, among other things, to the terms of a borrowing base derived from the value of eligible inventory and/or eligible accounts receivable of certain of Toys “R” Us Europe, LLC’s (“Toys Europe”) and Toys “R” Us Australia Holdings, LLC’s (“Toys Australia”) subsidiaries organized in Australia, England and France. The terms of the European ABL include a customary cash dominion trigger requiring the cash of certain of Toys Europe’s and Toys Australia’s subsidiaries to be applied to pay down outstanding loans if availability falls below certain thresholds. The European ABL also contains a springing fixed charge coverage ratio of 1.00 to 1.00 based on earnings before interest, taxes, depreciation and amortization ("EBITDA") (as defined in the agreement governing the European ABL) and fixed charges of Toys Europe, Toys Australia and their subsidiaries. Borrowings under the European ABL are guaranteed by Toys Europe, Toys Australia and certain of their material subsidiaries, with certain customary local law limitations and to the extent such guarantees do not result in adverse tax consequences. Borrowings are secured by substantially all of the assets of Toys Europe, Toys Australia and the U.K. and Australian obligors, as well as by share pledges over the shares of certain other material subsidiaries and pledges over certain of their assets (including bank accounts and certain receivables). The European ABL contains covenants that, among other things, restrict the ability of Toys Europe and Toys Australia and their respective subsidiaries to incur certain additional indebtedness, create or permit liens on assets, repurchase or pay dividends or make certain other restricted payments on capital stock, make acquisitions or investments or engage in mergers or consolidations. At October 29, 2011, we had outstanding borrowings of $65 million and $135 million of availability under the European ABL.

7.625% notes, due fiscal 2011 ($0 million at October 29, 2011)

On June 24, 2011, we redeemed the outstanding principal amount of the 2011 Notes for a total redemption price, including interest and premiums, of approximately $519 million.

Toys - Japan Bank Loans (1.85% to 2.85%), due fiscals 2012 - 2016 ($190 million at October 29, 2011)

Toys - Japan currently has six bank loans with various financial institutions totaling $190 million at October 29, 2011. On February 28, 2011, Toys-Japan entered into a bank loan with a financial institution totaling ¥1.0 billion ($13 million at October 29, 2011). The loan will mature on February 25, 2016 and bears an interest rate of 1.85% per annum. Fees paid in connection with this loan were nominal and are capitalized as deferred debt issuance costs and amortized over the term of the loan.

10.75% senior notes, due fiscal 2017 ($930 million at October 29, 2011)

In accordance with the indenture governing TRU Propco I’s 10.75% senior notes (the “Notes”), TRU Propco I commenced a tender offer on May 13, 2011 to purchase up to an aggregate principal amount of approximately $25 million of the Notes for cash. The tender offer expired on June 13, 2011, with no holders opting to tender at that time. Therefore, as permitted by the indenture, TRU Propco I made a cash distribution of approximately $25 million to Toys "R" Us, Inc. on June 20, 2011.

Incremental Secured Term Loan, due fiscal 2018 ($395 million at October 29, 2011)

On May 25, 2011, Toys-Delaware and certain of its subsidiaries entered into an Incremental Joinder Agreement (the “Joinder Agreement”) to the amended and restated Toys-Delaware's secured term loan agreement (“Secured Term Loan”). The Joinder Agreement added a new tranche of term loans in an aggregate principal amount of $400 million due fiscal 2018 (“Incremental Secured Term Loan”), which increased the size of the Secured Term Loan to an aggregate principal amount of $1.1 billion (“New Secured Term Loan”).

The Incremental Secured Term Loan was issued at a discount of $4 million which resulted in gross proceeds of $396 million. The gross proceeds were used to pay transaction fees of approximately $7 million, including fees payable to the Sponsors pursuant to their advisory agreement, which are capitalized as deferred debt issuance costs and amortized over the term of the agreement. Investment funds or accounts advised by Kohlberg Kravis Roberts & Co. L.P. (“KKR”) owned $46 million of the Incremental Secured Term Loan as of October 29, 2011. On June 24, 2011, the net proceeds from the Incremental Secured Term Loan along with borrowings from our ABL Facility were used to provide funds to redeem the outstanding principal amount of the 7.625% notes due fiscal 2011 (the “2011 Notes”) for a total redemption price, including interest and premiums, of approximately $519 million. The Incremental Secured Term Loan will mature on May 25, 2018, and bears interest at LIBOR (with a floor of 1.50%) plus 3.75%, which is subject to a step down of 0.25% based on total leverage.

The New Secured Term Loan contains customary covenants applicable to Toys-Delaware and certain of its subsidiaries, including, among other things, covenants that restrict the ability of Toys–Delaware and certain of its subsidiaries to incur certain additional indebtedness, create or permit liens on assets, or engage in mergers or consolidations, pay dividends, repurchase capital stock, make other restricted payments, make loans or advances, engage in transactions with affiliates, or amend material documents. These covenants are subject to certain exceptions, including among other things, allowing unsecured later-maturing debt subject to a fixed charge coverage test, providing funds for the prepayment or repayment of the 2011 Notes and our 7.875% senior notes due fiscal 2013 subject to Toys-Delaware meeting a total leverage test, and the provision of exceptions allowing for Toys-Delaware and certain of its subsidiaries to make certain investments, pay certain dividends and make certain other restricted payments including a cumulative credit exception subject to Toys-Delaware meeting a fixed charge coverage test. If an event of default under the New Secured Term Loan occurs and is continuing, the principal amount outstanding, together with all accrued unpaid interest and other amounts owed may be declared immediately due and payable by the lenders. Pursuant to the terms of the agreement, Toys-Delaware is required to make quarterly principal payments equal to 0.25% ($7 million and $4 million per year for the Secured Term Loan and the Incremental Secured Term Loan, respectively) of the original principal amount of the loans. Toys-Delaware may optionally prepay the outstanding principal balance of the Secured Term Loan and the Incremental Secured Term Loan at any time. However, if Toys-Delaware prepays the outstanding principal balance of the Incremental Secured Term Loan on or prior to May 25, 2012, Toys-Delaware would pay a premium equal to 1% of the remaining balance.

Further, the New Secured Term Loan is guaranteed by certain of Toys-Delaware subsidiaries and the borrowings thereunder are secured on a pari passu basis with the Toys-Delaware’s 7.375% senior secured notes due fiscal 2016 (“Toys-Delaware Secured Notes”) by the trademarks and certain other intellectual property of Geoffrey, LLC, our wholly owned subsidiary, and second priority liens on assets securing the ABL Facility including inventory, accounts receivable, equipment and certain other personal property owned or acquired by Toys-Delaware and certain of its subsidiaries.