Pep Boys 2014 Annual Report Download - page 35

that (i) increased the size of our Senior Secured Term Loan (the ‘‘Term Loan’’) to $200.0 million,
(ii) extended the maturity of the Term Loan from October 27, 2013 to October 11, 2018, (iii) reset the
interest rate under the Term Loan to the London Interbank Offered Rate (LIBOR), subject to a floor
of 1.25%, plus 3.75% and (iv) added an additional 16 of our owned locations to the collateral pool
securing the Term Loan. The amended and restated Term Loan was deemed to be substantially
different than the prior Term Loan, and therefore the modification of the debt was treated as a debt
extinguishment.
Net proceeds from the amended and restated Term Loan together with cash on hand were used to
settle the outstanding interest rate swap on the Term Loan as structured prior to its amendment and
restatement and to satisfy and discharge all of our outstanding 7.5% Senior Subordinated Notes
(‘‘Notes’’) due 2014. The settlement of the interest rate swap resulted in the reclassification of
$7.5 million of accumulated other comprehensive loss to interest expense. We recognized, in interest
expense, $1.9 million of deferred financing costs related to the Notes and the Term Loan as structured
prior to its amendment and restatement. The interest payment and the swap settlement payment are
presented within cash flows from operations on the consolidated statement of cash flows.
On November 12, 2013, the Company entered into the First Amendment to the Second Amended
and Restated Credit Agreement. The First Amendment reduced the interest rate payable by the
Company from (i) LIBOR, subject to a 1.25% floor, plus 3.75% to (ii) LIBOR, subject to a 1.25%
floor, plus 3.00%. The reduction in the interest rate lowered interest expense by approximately
$1.5 million in annualized interest savings.
As of January 31, 2015, 141 stores collateralized the Term Loan. The amount outstanding under
the Term Loan as of January 31, 2015 and February 1, 2014 was $196.0 million and $198.0 million,
respectively.
Revolving Credit Agreement, Through July 2016
On January 16, 2009 we entered into the Revolving Credit Agreement among the Company, Bank
of America, N.A., as Administrative Agent, and the other parties thereto providing for borrowings of
up to $300.0 million and having a maturity of January 2014. Total incurred fees of $6.8 million were
capitalized and are being amortized over the original five year life of the facility. On July 26, 2011, we
amended and restated the Revolving Credit Agreement to reduce its interest rate by 75 basis points
and to extend its maturity to July 2016. Our ability to borrow under the Revolving Credit Agreement is
based on a specific borrowing base consisting of inventory and accounts receivable. The interest rate on
this facility is LIBOR plus a margin of 2.00% to 2.50% for LIBOR rate borrowings or Prime plus
1.00% to 1.50% for Prime rate borrowings. The margin is based upon the then current availability
under the facility. As of January 31, 2015, we had $17.0 million in borrowings outstanding under the
facility and $35.1 million of availability was utilized to support outstanding letters of credit. Taking this
into account and the borrowing base requirements (including reduction for amount outstanding under
the trade payable program), as of January 31, 2015 there was $138.4 million of availability remaining
under the facility.
Other Matters
Our debt agreements require compliance with covenants. The most restrictive of these covenants,
an earnings before interest, taxes, depreciation and amortization (‘‘EBITDA’’) requirement, is triggered
if the availability under our Revolving Credit Agreement plus unrestricted cash drops below
$50.0 million. As of January 31, 2015, we were in compliance with all financial covenants contained in
our debt agreements.
The weighted average interest rate on all debt borrowings during fiscal 2014 and 2013 was 4.1%
and 4.9%, respectively.
29