Long-Term Debt and Credit Arrangements

As of July 28, 2017, long-term debt was comprised of $90,000 outstanding under our $300,000 revolving credit facility ("Credit Facility"), the long-term portion of a $3,000 Research and Development Investment Loan ("R&D Loan") and an interest-free loan of $1,000, due 10 years from the date of borrowing, with imputed interest, which as a result is discounted to $898. Refer to the table below:



(in thousands)	July 28, 2017			April 28, 2017
Credit Facility borrowings ⁽¹⁾	$	90,000		$	—
R&D Loan ⁽¹⁾	1,695			1,801
Interest-free loan ⁽¹⁾	898			894
Total borrowings	92,593			2,695
Less current portion	(425		)	(428		)
Long-term debt	$	92,168		$	2,267

(1) The Credit Facility, R&D Loan and Interest-free loan mature in fiscal 2022, 2021 and 2022, respectively.

Credit Facility Borrowings

On April 28, 2017, the Company entered into the Credit Facility, which established a syndicated secured revolving credit facility under which up to $300,000 will be available, with a letter of credit sub-facility of $20,000, and an accordion option to increase the revolving credit commitment to $400,000. All obligations under the Credit Facility are unconditionally guaranteed by the Company as well as certain wholly owned subsidiaries, and are secured by a first-priority security interest in certain property and assets of the Company, including accounts receivable, inventory, equipment, intellectual property and certain other assets, including stock pledges of certain material direct subsidiaries of the Company. The Credit Facility has a maturity date of April 28, 2022. We incurred financing costs of $1,542 associated with the Credit Facility, which are being amortized over the five-year term of the facility.

The primary purposes of the Credit Facility are for stand-by letters of credit in the ordinary course of business as well as working capital, capital expenditures, acquisitions, stock repurchases, dividends and other general corporate purposes.

Borrowings under the Credit Facility bear interest, at borrower’s option, at a rate based on the Eurodollar Rate or the Base Rate, plus a margin based on the Consolidated Leverage Ratio, as detailed in the Credit Facility, ranging from 1.25% to 2.00% per annum for Eurodollar Rate, and ranging from 0.25% to 1.00% per annum for Base Rate. Base Rate means, for any day, a fluctuating per annum rate of interest equal to the highest of (i) the Federal Funds Rate, plus 0.50%, and (ii) Bank of America, N.A.’s “prime rate”, and (iii) the Eurodollar Rate, plus 1.0%. As of July 28, 2017, the margin on LIBOR-based loans was 1.50% per annum and the margin on Base Rate-based loans was 0.50% per annum. Commitment fees payable under the Credit Facility are also based on the Consolidated Leverage Ratio as defined in the Credit Facility and range from 0.20% per annum to 0.30% per annum of the average unused portion of the total lender commitments then in effect.

The terms of the Credit Facility provide for customary representations and warranties and affirmative covenants. The Credit Facility contains negative covenants usual and customary for a transaction of this nature. The Credit Agreement also contains financial covenants that require us to maintain a specified minimum coverage ratio of not less than 3.00 to 1.00, and a maximum leverage ratio that may not exceed 3.50 to 1.00. As of July 28, 2017, we had $90,000 outstanding on the Credit Agreement and we were in compliance with all covenants. A breach of any of these covenants could result in a default under our Credit Facility, in which all amounts under the Credit Facility may become immediately due and payable, and all commitments under our Credit Facility to extend further credit may be terminated. The carrying value of our Credit Facility borrowings approximates its fair value due to the variable rate nature the debt instrument.

As of July 28, 2017, we had outstanding letters of credit that totaled $7,136, all of which were utilized as part of the total amount available under our Credit Facility. If certain conditions are met under these arrangements, we would be required to satisfy the obligations in cash. Due to the nature of these arrangements and based on historical experience and future expectations, we do not expect to make any significant payment outside of the terms set forth in these arrangements.

Our effective interest rate for the Credit Facility was 2.71% for the three months ended July 28, 2017, and our effective interest rate on outstanding borrowings was 2.48% for the three months ended July 29, 2016.

Net interest expense during three months ended July 28, 2017 and July 29, 2016 was comprised of the following:



	Three Months Ended
(in thousands)	July 28, 2017			July 29, 2016
Interest expense:
Variable-rate debt ⁽¹⁾	$	447		$	1,965
Fixed-rate debt ⁽²⁾	92			396
Capitalized interest	(8		)	(198		)
Total interest expense on outstanding borrowings	531			2,163
Interest income:
Accretion on note receivable ⁽³⁾	—			(558		)
Other	(71		)	(118		)
Total interest income	(71		)	(676		)
Net interest expense from continuing operations	$	460		$	1,487


(1)	Primarily interest expense on our Credit Facility borrowings for the three months ended July 28, 2017, and interest expense on our former credit agreement for the three months ended July 29, 2016.


(2)	Includes the amortization of debt issuance costs.


(3)	Accretion on our $30,000 note receivable, obtained as part of the sale of Mimi’s Café to Le Duff which was settled in the third quarter of fiscal 2017.