Pep Boys 2007 Annual Report Download - page 96

THE PEP BOYS—MANNY, MOE & JACK AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
Years ended February 2, 2008, February 3, 2007 and January 28, 2006
(dollar amounts in thousands, except share data)
holders of the convertible notes to convert them into shares of the Company’s common stock, at any
time until the June 1, 2007 maturity date, survived such satisfaction and discharge, although no notes
were converted prior to maturity. The Company recorded a non-cash charge for the value of such
conversion right, approximately $755 as determined by the Black-Scholes method, and $430 for
deferred financing cost.
On February 15, 2007, the Company further amended the Senior Secured Term Loan facility to
reduce the interest rate from LIBOR plus 2.75% to LIBOR plus 2.00%.
On November 27, 2007, the Company sold the land and buildings for 34 owned properties to an
independent third party. Concurrent with the sale, the Company entered into agreements to lease the
stores back from the purchaser over minimum lease terms of 15 years. The Company used $162,558 of
the net proceeds to prepay a portion of the Senior Secured Term Loan facility. This prepayment in
conjunction with the ordinary amortization of the principal balance, reduced the principal amount of
the facility to $155,000 and reduced the scheduled quarterly repayments from $800 to $391. The
number of stores in the collateral pool, which secures the facility, was simultaneously reduced by 136
stores (bringing the total remaining collateral to 105). The Company has continuing involvement in one
property and has recorded the $4,742 proceeds, net of execution costs, as a debt borrowing and
continues to reflect the property on its balance sheet in accordance with Statement of Financial
Accounting Standards No. 13, ‘‘Accounting for Leases.’’
Senior Subordinated Notes due December, 2014
On December 14, 2004, the Company issued $200,000 aggregate principal amount of 7.5% Senior
Subordinated Notes due December 15, 2014.
Line of Credit Agreement due December, 2009
On December 2, 2004, the Company further amended its amended and restated line of credit
agreement. The amendment increased the amount available for borrowings to $357,500, with an ability,
upon satisfaction of certain conditions, to increase such amount to $400,000. The amendment also
reduced the interest rate under the agreement to LIBOR plus 1.75% (after June 1, 2005, the rate
decreased to LIBOR plus 1.50%, subject to 0.25% incremental increases as excess availability falls
below $50,000). The amendment also provided the flexibility, upon satisfaction of certain conditions, to
release up to $99,000 of reserved credit line availability required as of December 2, 2004 under the line
of credit agreement to support certain operating leases. This reserve was $73,924 on February 2, 2008.
Finally, the amendment extended the term of the agreement through December 2009. The weighted
average interest rate on borrowings under the line of credit agreement was 7.51% and 7.67% at
February 2, 2008 and February 3, 2007, respectively.
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10-K