This excerpt taken from the LUX 20-F filed Jun 29, 2007.
The U.S.$350 Million Credit Facility with UniCredito Italiano and the Convertible Swap Step-Up
To refinance previously issued Eurobonds, in June 2002, U.S. Holdings, a U.S. subsidiary, entered into a U.S.$350 million credit facility with a group of four Italian banks led by UniCredito Italiano S.p.A. The term loan portion of the credit facility provided U.S.$200 million of borrowing and required equal quarterly principal installments beginning in March 2003. The revolving loan portion of the credit facility allowed for maximum borrowings of U.S.$150 million. Interest accrued under the credit facility at LIBOR (as defined in the agreement) plus 0.5 percent and the credit facility allowed U.S.
Holdings to select interest periods of one, two or three months. The credit facility contained certain financial and operating covenants. The credit facility was guaranteed by Luxottica Group S.p.A. and matured in June 2005, and at such time we repaid in full all of the outstanding amounts under this credit facility.
In July 2002, U.S. Holdings entered into a Convertible Swap Step-Up (2002 Swap). The beginning and maximum notional amount of 2002 Swap was U.S.$275 million, which decreased by U.S.$20 million quarterly, beginning with the quarter commencing on March 17, 2003. The 2002 Swap was entered into to convert the floating rate credit agreement referred to in the preceding paragraph to a mixed position rate agreement by allowing U.S. Holdings to pay a fixed rate of interest if LIBOR remains under certain defined thresholds and for U.S. Holdings to receive an interest payment at the three-month LIBOR rate as defined in the agreement. These amounts were settled net every three months until the final expiration of the 2002 Swap which occurred on June 17, 2005. The 2002 Swap did not qualify for hedge accounting under SFAS No. 133, Accounting for Derivative Instruments and Hedging Activities, as amended, and, as such, was marked to market with the gains or losses from the change in value reflected in current operations. Marked to market gains of Euro 1.491 million are included in current operations in 2004, while in 2005 we recognized a loss of Euro 0.163 million in current operations.