Advance Auto Parts 2014 Annual Report Download - page 39

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Senior Unsecured Notes
We issued 4.50% senior unsecured notes in December 2013 at 99.69% of the principal amount of $450 million which are
due December 1, 2023 (the “2023 Notes”). The 2023 Notes bear interest at a rate of 4.50% per year payable semi-annually in
arrears on June 1 and December 1 of each year. The net proceeds from the offering of these notes were approximately $445.2
million, after deducting underwriting discounts and commissions and estimated offering expenses payable by us. The net
proceeds from the 2023 Notes were used in aggregate with borrowings under our revolving credit facility and term loan and
cash on-hand to fund our acquisition of GPI on January 2, 2014.
We previously issued 4.50% senior unsecured notes in January 2012 at 99.968% of the principal amount of $300 million
which are due January 15, 2022 (the “2022 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 also previously issued 5.75% senior unsecured notes in April
2010 at 99.587% of the principal amount of $300 million which are due May 1, 2020 (the “2020 Notes” or collectively with the
2023 Notes and the 2022 Notes, “the 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. Advance served as the issuer of the Notes with certain of Advance's
domestic subsidiaries currently serving as subsidiary guarantors. The terms of the Notes are governed by an indenture (as
amended, supplemented, waived or otherwise modified, the “Indenture”) among us, the subsidiary guarantors from time to time
party thereto 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 the Indenture 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 our legal or covenant
defeasance option.
The Indenture contains customary provisions for events of default including for: (i) failure to pay principal or interest when
due and payable; (ii) failure to comply with covenants or agreements in the Indenture or the Notes and failure to cure or obtain
a waiver of such default upon notice; (iii) a default under any debt for money borrowed by us or any of our subsidiaries that
results in acceleration of the maturity of such debt, or failure to pay any such debt within any applicable grace period after final
stated maturity, in an aggregate amount greater than $25.0 million without such debt having been discharged or acceleration
having been rescinded or annulled within 10 days after receipt by us of notice of the default by the Trustee or holders of not
less than 25% in aggregate principal amount of the Notes then outstanding; and (iv) events of bankruptcy, insolvency or
reorganization affecting us and certain of our subsidiaries. In the case of an event of default, the principal amount of the Notes
plus accrued and unpaid interest may be accelerated. The Indenture also contains covenants limiting the ability of us and our
subsidiaries to incur debt secured by liens and to enter into sale and lease-back transactions.
As of January 3, 2015, 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
We guarantee loans made by banks to various of our independent store customers totaling $33.6 million as of January 3,
2015. These loans are collateralized by security agreements on merchandise inventory and other assets of the borrowers. We
believe the likelihood of performance under these guarantees is remote and that the fair value of these guarantees is very
minimal. As of January 3, 2015, we had no other 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.