Dollar General 2012 Annual Report Download - page 97

10-K
Our ability to obtain additional financing on favorable terms could be adversely affected by volatility in
the capital markets.
We obtain and manage liquidity from the positive cash flow we generate from our operating
activities and our access to capital markets, including our credit facilities. There is no assurance that
our ability to obtain additional financing through the capital markets will not be adversely impacted by
economic conditions. Tightening in the credit markets, or low liquidity and volatility in the capital
markets could result in diminished availability of credit and higher cost of borrowing, making it more
difficult to obtain additional financing on terms favorable to us.
Our variable rate debt exposes us to interest rate risk which could adversely affect our cash flow.
The borrowings under the term loan facility and the senior secured asset-based revolving credit
facility comprise our credit facilities and bear interest at variable rates. 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 entered 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.
Our debt agreements contain restrictions that could limit our flexibility in operating our business.
Our credit facilities and the indenture governing our notes contain various covenants that could
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;
• allow payments to us by our restricted subsidiaries;
• 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 notes. We have pledged a
significant portion of our assets as collateral under our credit facilities. If we were unable to repay
those amounts, the lenders under our credit facilities could proceed against the collateral granted to
them to secure that indebtedness. Additional borrowings under the senior secured asset-based revolving
credit facility will, if excess availability under that facility is less than a certain amount, be subject to the
satisfaction of a specified financial ratio. Accordingly, our ability to access the full availability under our
senior secured asset-based revolving credit facility may be constrained. Our ability to meet this financial
ratio can be affected by events beyond our control, and we cannot assure you that we will meet this
ratio, if applicable, and other covenants.
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