Dollar General 2007 Annual Report Download - page 13
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11
In addition, the borrowings under our New Credit Facilities bear interest at variable rates
and other debt we incur also could be variable-rate debt. If market interest rates increase,
variable-rate debt will create higher debt service requirements, which could adversely affect our
cash flow. While we have and may in the future enter into agreements limiting our exposure to
higher interest rates, any such agreements may not offer complete protection from this risk. We
and our subsidiaries may be able to incur substantial additional indebtedness in the future,
subject to the restrictions contained in our New Credit Facilities and the indentures governing
our debt securities. If new indebtedness is added to our current debt levels, the related risks that
we now face could intensify.
Our debt agreements contain restrictions that limit our flexibility in operating our
business.
Our New Credit Facilities and the indentures governing our debt securities contain
various covenants that limit our ability to engage in specified types of transactions. These
covenants limit our and our restricted subsidiaries’ ability to, among other things:
• incur additional indebtedness, issue disqualified stock or issue certain preferred stock;
• pay dividends and make certain distributions, investments and other restricted
payments;
• create certain liens or encumbrances;
• sell assets;
• enter into transactions with our affiliates;
• limit the ability of restricted subsidiaries to make payments to us;
• merge, consolidate, sell or otherwise dispose of all or substantially all of our assets;
and
• designate our subsidiaries as unrestricted subsidiaries.
A breach of any of these covenants could result in a default under the agreement
governing such indebtedness. Upon our failure to maintain compliance with these covenants, the
lenders could elect to declare all amounts outstanding thereunder to be immediately due and
payable and terminate all commitments to extend further credit thereunder. If the lenders under
such indebtedness accelerate the repayment of borrowings, we cannot assure you that we will
have sufficient assets to repay those borrowings, as well as our other indebtedness, including our
outstanding debt securities. We have pledged a significant portion of our assets as collateral
under our New Credit Facilities. If we were unable to repay those amounts, the lenders under
our New Credit Facilities could proceed against the collateral granted to them to secure that
indebtedness. Additional borrowings under the ABL Facility will, if excess availability under
that facility is less than a certain amount, be subject to the satisfaction of a specified financial