(Solution) - Loblaw Companies Limited distribute food general merchandise and financial products -(2025 Original AI-Free Solution)

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Loblaw Companies Limited distribute food, general merchandise, and financial products and services across Canada, through Superstore, Extra Foods, Dominion, Fortinos, No Frills, Independent, Zehrs, Dominion and Provigo, as well as Loblaws stores. Their brands include President's Choice, no name, and Joe Fresh Style. Exhibit 10-16 contains excerpts from three notes related to long-term liabilities accompanying Loblaw Companies Limited's 2009 financial statements. All dollar amounts in the notes are in millions.
During 2008, the Company issued United States Dollar ("USD") $300 of fixed rate notes in a private placement debt financing which contains certain financial covenants (see note 21). The notes were issued in two equal tranches of USD $150 with 5 and 7 year maturities at interest rates of 6.48% and 6.86%, respectively.
LOBLAW COMPANIES LIMITED 2009 ANNUAL REPORT
Excerpts from Notes 18 and 21 to the Financial Statements

a. Looking at Loblaw's series of notes outstanding and the recent private placement, what do you think the relationship is between interest rates and the length of time to maturity of a loan? As an investor, explain why this relationship would be important to you.
b. Compare the rate of interest on the long-term debt secured by a mortgage that is due in 2018 to the note due in 2016. Why do you think the debt due in 2018 has a lower interest rate than the note due in 2016?
c. Explain why Loblaw would spread out the maturities of their debt over such a long period of time. When they issued the private placement notes, why did they not arrange to have both tranches mature at the same time?
d. What is meant by a private placement?
e. Are capital (finance) leases a major form of long-term financing for Loblaw? Support your answer.
f. Does Loblaw use many operating leases? Why might an analyst be concerned with Loblaw's operating leases?
g. What type of covenants are attached to Loblaw's long-term debt? Explain why these covenants would be useful to lenders or investors.