GameStop 2006 Annual Report Download - page 89

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The availability under the Revolver is limited to a borrowing base which allows the Company to borrow up to
the lesser of (x) approximately 70% of eligible inventory and (y) 90% of the appraisal value of the inventory, in each
case plus 85% of eligible credit card receivables, net of certain reserves. Letters of credit reduce the amount
available to borrow by their face value. The Company’s ability to pay cash dividends, redeem options, and
repurchase shares is generally prohibited, except that if availability under the Revolver is or will be after any such
payment equal to or greater than 25% of the borrowing base the Company may repurchase its capital stock and pay
cash dividends. In addition, in the event that credit extensions under the Revolver at any time exceed 80% of the
lesser of the total commitment or the borrowing base, the Company will be subject to a fixed charge coverage ratio
covenant of 1.5:1.0.
The interest rate on the Revolver is variable and, at the Company’s option, is calculated by applying a margin
of (1) 0.0% to 0.25% above the higher of the prime rate of the administrative agent or the federal funds effective rate
plus 0.50% or (2) 1.25% to 1.75% above the LIBO rate. The applicable margin is determined quarterly as a function
of the Company’s consolidated leverage ratio. As of February 3, 2007 the applicable margin was 0.0% for prime rate
loans and 1.50% for LIBO rate loans. In addition, the Company is required to pay a commitment fee, currently
0.375% as of February 3, 2007, for any unused portion of the total commitment under the Revolver.
As of February 3, 2007, there were no borrowings outstanding under the Revolver and letters of credit
outstanding totaled $4,251.
On September 28, 2005, the Company, along with GameStop, Inc. (which was then a direct wholly-owned
subsidiary of Historical GameStop and is now, as a result of the mergers, an indirect wholly-owned subsidiary of the
Company) as co-issuer (together with the Company, the “Issuers”), completed the offering of U.S. $300,000
aggregate principal amount of Senior Floating Rate Notes due 2011 (the “Senior Floating Rate Notes”) and
U.S. $650,000 aggregate principal amount of Senior Notes due 2012 (the “Senior Notes” and, together with the
Senior Floating Rate Notes, the “Notes”). The Notes were issued under an indenture (the “Indenture”), dated
September 28, 2005, by and among the Issuers, the subsidiary guarantors party thereto, and Citibank, N.A., as
trustee (the “Trustee”). Concurrently with the consummation of the merger on October 8, 2005, EB and its direct
and indirect domestic wholly-owned subsidiaries (together, the “EB Guarantors”) became subsidiaries of the
Company and entered into a first supplemental indenture, dated October 8, 2005, by and among the Issuers, the EB
Guarantors and the Trustee, pursuant to which the EB Guarantors assumed all the obligations of a subsidiary
guarantor under the Notes and the Indenture. The net proceeds of the offering were used to pay the cash portion of
the merger consideration paid to the stockholders of EB in connection with the mergers.
The Senior Floating Rate Notes bear interest at LIBOR plus 3.875%, mature on October 1, 2011 and were
priced at 100%. The rate of interest on the Senior Floating Rate Notes as of February 3, 2007 was 9.235% per
annum. The Senior Notes bear interest at 8.0% per annum, mature on October 1, 2012 and were priced at 98.688%,
resulting in a discount at the time of issue of $8,528. The discount is being amortized using the effective interest
method. As of February 3, 2007, the unamortized original issue discount was $6,689.
The Issuers pay interest on the Senior Floating Rate Notes quarterly, in arrears, every January 1, April 1, July 1
and October 1, to holders of record on the immediately preceding December 15, March 15, June 15 and
September 15, and at maturity. The Issuers pay interest on the Senior Notes semi-annually, in arrears, every
April 1 and October 1, to holders of record on the immediately preceding March 15 and September 15, and at
maturity.
The Indenture contains affirmative and negative covenants customary for such financings, including, among
other things, limitations on (1) the incurrence of additional debt, (2) restricted payments, (3) liens, (4) sale and
leaseback transactions and (5) asset sales. Events of default provided for in the Indenture include, among other
things, failure to pay interest or principal on the Notes, other breaches of covenants in the Indenture, and certain
events of bankruptcy and insolvency.
As of February 3, 2007, the Company was in compliance with all covenants associated with the Revolver and
the Indenture.
F-21
GAMESTOP CORP.
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS — (Continued)