Advance Auto Parts 2007 Annual Report Download - page 54

Long Term Debt
On December 4, 2007, we entered into a new $200.0 million unsecured four-year term loan with our subsidiary,
Advance Stores Company, Incorporated, or Stores, serving as borrower. Proceeds from this term loan will be used to
repurchase shares of our common stock under our stock repurchase program. As of December 29, 2007, Stores had
borrowed $50.0 million under the term loan. Subsequent to December 29, 2007, Stores borrowed the remaining
capacity under the term loan. Voluntary prepayments and voluntary reductions of the term loan balance are
permitted in whole or in part, at our option, in minimum principal amounts as specified in the new term loan.
In addition to the term loan, we have in place a $750.0 million unsecured five-year revolving credit facility with
Stores serving as the borrower. This facility was entered into in October 2006 and replaced our term loans and
revolver under the previous credit facility. Proceeds from this revolving loan facility were used to repay $433.8
million of principal outstanding on our term loans and revolver under our previous credit facility. In conjunction
with this refinancing, we wrote-off existing deferred financing costs related to our previous term loans and revolver.
The write-off of these costs of $1.9 million was combined with a related gain on settlement of interest rate swaps of
$2.9 million for a net gain on extinguishment of debt of $1.0 million during fiscal year 2006.
The revolving credit facility also provides for the issuance of letters of credit with a sub limit of $300.0 million
and swingline loans in an amount not to exceed $50.0 million. We may request that the total revolving commitment
be increased by an amount not exceeding $250.0 million during the term of the credit agreement. Voluntary
prepayments and voluntary reductions of the revolving balance are permitted in whole or in part, at our option, in
minimum principal amounts as specified in the revolving credit facility.
As of December 29, 2007, we had borrowed $451.0 million under the revolver and had $74.7 million in letters
of credit outstanding, which reduced availability under the revolver to $224.3 million. In addition, we had
outstanding $4.7 million under an economic development note. We also maintain approximately $2.5 million in
surety bonds issued by our insurance provider primarily to utility providers and the departments of revenue for
certain states. These letters of credit and surety bonds generally have a term of one year or less.
The interest rate on the term loan will be based, at our option, on an adjusted LIBOR rate, plus a margin, or an
alternate base rate, plus a margin. The initial margin is 1.00% and 0.0% per annum for the adjusted LIBOR and
alternate base rate borrowings, respectively. We have elected to use the 90-day adjusted LIBOR rate and has the
ability and intent to continue to use this rate on its hedged borrowings. A commitment fee will be charged on the
unused portion of the term loan, payable in arrears. The initial commitment fee rate is 0.200% per annum. Under the
terms of the term loan, the interest rate spread and commitment fee will be based on our credit rating. The term
loan terminates on October 5, 2011.
The interest rates on borrowings under the revolving credit facility will be based, at our option, on an adjusted
LIBOR rate, plus a margin, or an alternate base rate, plus a margin. The current margin is 0.75% and 0.0% per
annum for the adjusted LIBOR and alternate base rate borrowings, respectively. We have elected to use the 90-day
adjusted LIBOR rate and have the ability and intent to continue to use this rate on our hedged borrowings. A
commitment fee will be charged on the unused portion of the revolver, payable in arrears. The current commitment
fee rate is 0.150% per annum. Under the terms of the revolving credit facility, the interest rate spread and
commitment fee will be based on our credit rating. The revolving facility terminates on October 5, 2011.
The term loan and revolving credit facilities are fully and unconditionally guaranteed by Advance Auto Parts,
Inc. Our debt agreements collectively contain covenants restricting the ability of us and our subsidiaries to, among
other things, (1) create, incur or assume additional debt (including hedging arrangements), (2) incur liens or engage
in sale-leaseback transactions, (3) make loans and investments, (4) guarantee obligations, (5) engage in certain
mergers, acquisitions and asset sales, (6) change the nature of our business and the business conducted by our
subsidiaries and (7) change our holding company status. We are required to comply with financial covenants with
respect to a maximum leverage ratio and a minimum consolidated coverage ratio. The revolving credit facility also
provides for customary events of default, including non-payment defaults, covenant defaults and cross-defaults to
our other material indebtedness. We were in compliance with these covenants at December 29, 2007.
31