Best Buy 2002 Annual Report Download - page 46

44 Notes to Consolidated Financial Statements
In June 2001, we sold, in a private offering, convertible
debentures having an initial aggregate principal amount
at maturity of $492. The proceeds from the offering, net
of $7 in offering expenses, were $330. The debentures
mature in 20 years and are callable at our option on or
after June 27, 2004. Holders may require us to purchase
all or a portion of their debentures on June 27, 2004;
June 27, 2009; and June 27, 2014, at a purchase price
equal to the accreted value of the debentures plus accrued
and unpaid cash interest up to but not including the date
of purchase. The debentures will be convertible into shares
of our common stock at a conversion rate of 11.80
7 1
shares per $0.001 initial principal amount at maturity of
debentures, equivalent to an initial conversion price of
$5 7 .91 per share, if the closing price of our common
stock exceeds a specified price for a specified period of
time, or otherwise upon the occurrence of certain events.
The debentures have an initial yield to maturity of 2.75%,
including a cash payment of 1.0% and an initial accretion
rate of 1.75%. The yield to maturity may be reset, but
may not fall below 2.75% or above 3.75%, on
Dec. 27, 2003; Dec. 27, 2008; and Dec. 27, 2013. The
debentures are guaranteed on an unsecured and
unsubordinated basis by Best Buy Stores, L.P., our wholly
owned indirect subsidiary. The debentures, the guarantee
and the underlying shares of common stock were registered
with the Securities and Exchange Commission pursuant to
a Registration Statement on Form S-3 that was declared
effective on Oct. 9, 2001.
Senior Subordinated Notes
Our Musicland subsidiary had $110 of Senior
Subordinated Notes due in 2003 (2003 Notes) and
$161 of Senior Subordinated Notes due in 2008 (2008
Notes) outstanding, which were acquired and recorded at
their fair value as part of the Musicland acquisition.
Fair value was based upon the present value of the
amounts expected to be paid. Both notes contained
change-in-control provisions that required us to offer to
repurchase the notes within 30 to 60 days after our
acquisition of Musicland. Our offer to repurchase both
notes was made on Feb. 12, 2001, at 101.0% of the
aggregate principal amount of the notes plus accrued
interest. The offer expired on March 16, 2001, at which
time $94 of the 2003 Notes had been tendered. In the
second quarter of fiscal 2002, we retired the remainder
of the 2003 notes and all but $5 of the 2008 notes.
Credit Agreement
We have two credit agreements that provide bank revolving
credit facilities under which we can borrow up to $200
and $44, respectively. The $44 facility, which was
acquired in connection with the Future Shop acquisition,
increases to $53 on a seasonal basis. The $200 facility,
entered into in March 2002 which replaced our $100
credit agreement, expires on March 21, 2005, and the
$44 facility expires in fiscal 2003. Borrowings under the
$200 facility are unsecured and bear interest at rates
specified in the credit agreements, as we have
elected. Borrowings under the $44 facility are secured by
merchandise inventories. We also pay certain facility and
agent fees.
The credit agreements contain covenants that require us to
maintain certain financial ratios and minimum net worth.
The $200 agreement also requires that we have no
outstanding principal balance for a period not less than
30 consecutive days, net of cash and cash equivalents.
We had no borrowings under the $100 facility during
fiscal 2002 or 2001. Future Shop had peak borrowings
under the $44 credit facility of $32 and $39 in fiscal
2002 and 2001, respectively.
$ in millions, except per share amounts