Advance Auto Parts 2012 Annual Report Download - page 38

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As of December 29, 2012, we had no borrowings outstanding under our revolving credit facility, and had letters of credit
outstanding of $78.8 million, which reduced the availability under the revolving credit facility to $671.2 million. The letters of
credit generally have a term of one year or less and primarily serve as collateral for our self-insurance policies.
The interest rate on borrowings under the revolving credit facility is based, at our option, on an adjusted LIBOR rate, plus
a margin, or an alternate base rate, plus a margin. The current margin is 1.5% per annum for each of the adjusted LIBOR and
alternate base rate borrowings. A facility fee is charged on the total amount of the revolving credit facility, payable in arrears.
The current facility fee rate is 0.25% per annum. Under the terms of the revolving credit facility, the interest rate and facility
fee are based on our credit rating.
Our revolving credit facility contains covenants restricting our ability to, among other things: (1) permit the subsidiaries of
Advance Stores to create, incur or assume additional debt; (2) incur liens or engage in sale-leaseback transactions; (3) make
loans and investments (including acquisitions); (4) guarantee obligations; (5) engage in certain mergers and liquidations; (6)
change the nature of our business and the business conducted by our subsidiaries; (7) enter into certain hedging transactions;
and (8) change our status as a holding company. We are also required to comply with financial covenants with respect to a
maximum leverage ratio and a minimum consolidated coverage ratio. We were in compliance with our covenants in place at
December 29, 2012 and December 31, 2011, respectively. Our revolving credit facility also provides for customary events of
default, covenant defaults and cross-defaults to other material indebtedness.
Senior Unsecured Notes
Our 5.75% senior unsecured notes were issued in April 2010 at 99.587% of the principal amount of $300 million and are
due May 1, 2020 (the "2020 Notes"). The 2020 Notes bear interest at a rate of 5.75% per year payable semi-annually in arrears
on May 1 and November 1 of each year. Our 4.50% senior unsecured notes were issued in January 2012 at 99.968% of the
principal amount of $300 million and are due January 15, 2022 (the "2022 Notes" or collectively with 2020 Notes, "the
Notes"). The 2022 Notes bear interest at a rate of 4.50% per year payable semi-annually in arrears on January 15 and July 15 of
each year. We served as the issuer of the Notes with certain of our domestic subsidiaries currently serving as subsidiary
guarantors. The terms of the Notes are governed by an indenture and supplemental indentures (collectively the “Indenture”)
among us, the subsidiary guarantors and Wells Fargo Bank, National Association, as Trustee.
We may redeem some or all of the Notes at any time or from time to time, at the redemption price described in the
Indenture. In addition, in the event of a Change of Control Triggering Event (as defined in each of the Indentures for the
Notes), we will be required to offer to repurchase the Notes at a price equal to 101% of the principal amount thereof, plus
accrued and unpaid interest to the repurchase date. The Notes are currently fully and unconditionally guaranteed, jointly and
severally, on an unsubordinated and unsecured basis by each of the subsidiary guarantors. We will be permitted to release
guarantees without the consent of holders of the Notes under the circumstances described in the Indenture: (i) upon the release
of the guarantee of our other debt that resulted in the affected subsidiary becoming a guarantor of this debt; (ii) upon the sale or
other disposition of all or substantially all of the stock or assets of the subsidiary guarantor; or (iii) upon our exercise of its legal
or covenant defeasance option.
As of December 29, 2012, we had a credit rating from Standard & Poor’s of BBB- and from Moody’s Investor Service of
Baa3. The current outlooks by Standard & Poor’s and Moody’s are both stable. The current pricing grid used to determine our
borrowing rate under our revolving credit facility is based on our credit ratings. If these credit ratings decline, our interest rate
on outstanding balances may increase and our access to additional financing on favorable terms may become more limited. In
addition, it could reduce the attractiveness of our vendor payment program, where certain of our vendors finance payment
obligations from us with designated third party financial institutions, which could result in increased working capital
requirements. Conversely, if these credit ratings improve, our interest rate may decrease.
Off-Balance-Sheet Arrangements
As of December 29, 2012, we had no off-balance-sheet arrangements as defined in Regulation S-K Item 303 of the SEC
regulations. We include other off-balance-sheet arrangements in our contractual obligations table including operating lease
payments, interest payments on our notes and revolving credit facility and letters of credit outstanding.