Radio Shack 2013 Annual Report Download - page 52

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• Engage in sale and leaseback transactions; and
• Consolidate or merge with or into other companies
or sell all or substantially all our assets.
At December 31, 2013, we were in compliance with these
covenants.
Credit Agreement Term Loan Due December 2018: In
December 2013 we entered into a term loan agreement for
$50.0 million under our 2018 Credit Agreement. The 2018
Credit Agreement Term Loan bears interest at our choice of
a bank’s prime rate plus 3.0% or LIBOR plus 4.0%. For this
term loan, interest is payable on the interest rate reset
dates, which will be on at least a quarterly basis. This term
loan is secured by the same assets that secure the 2018
Credit Facility and matures in December 2018.
This term loan was issued at a discount of $1.5 million for
aggregate consideration of $48.5 million, and resulted in
net proceeds to the Company of $47.7 million, after the
payment of debt issuance costs of $0.8 million. These
proceeds were used to repay outstanding debt at the time
of the borrowing. This term loan may not be repaid until all
revolving borrowings, letters of credit, or other
commitments under the 2018 Credit Facility have been
repaid or otherwise satisfied.
Term Loan Due December 2018: In December 2013 we
borrowed $250 million, due in December 2018, under a
new term loan credit agreement (“2018 Term Loan”) with
two lenders and Salus Capital Partners, LLC as
administrative and collateral agent. The 2018 Term Loan
bears interest at our choice of a bank’s prime rate plus
10.0% or LIBOR plus 11.0%, but never less than 11.5%.
Interest is payable on a monthly basis.
This term loan was issued at a discount of $9.2 million for
aggregate consideration of $240.8 million, and resulted in
net proceeds to the Company of $237.0 million, after the
payment of debt issuance costs of $3.8 million. A portion of
these proceeds was used to repay outstanding debt at the
time of the borrowing. The remaining proceeds will be used
for working capital and general corporate purposes.
Obligations under the 2018 Term Loan are guaranteed by
all of our wholly-owned domestic subsidiaries except Tandy
Life Insurance Company. The 2018 Term Loan is secured
on a second priority basis by current assets and by a first
priority lien on fixed assets, intellectual property and equity
interests of our direct and indirect subsidiaries.
If we or any of our subsidiaries that are guarantors of our
obligations under the 2018 Term Loan sell assets on which
the lenders holding all or a portion of the 2018 Term Loan
have a first priority lien (other than sales of surplus property
in the ordinary course of business not in connection with a
store closure), we must use the net proceeds from the sale
to repay the 2018 Term Loan.
Voluntary prepayments of the 2018 Term Loan must be in
amounts of $1.0 million or more. Voluntary and certain
mandatory prepayments are subject to prepayment
premiums of 4% in year one, 3% in year two, 2% in year
three, and 1% in year four. The 2018 Term Loan contains
affirmative and negative covenants and events of default
that are substantially similar to those contained in the 2018
Credit Agreement.
2019 Notes: On May 3, 2011, we sold $325 million
aggregate principal amount of 6.75% senior unsecured
notes due May 15, 2019, in a private offering to qualified
institutional buyers (such notes, together with any notes
issued in the exchange offer we subsequently registered
with the SEC for such notes (the “Exchange Offer”), being
referred to as the “2019 Notes”). In September 2011
substantially all of the privately placed notes were
exchanged for notes in an equal principal amount that we
issued pursuant to the Exchange Offer. Accordingly, the
exchange resulted in the issuance of substantially all of the
2019 Notes in a transaction registered with the SEC, but it
did not result in the incurrence of any additional debt.
The obligation to pay principal and interest on the 2019
Notes is jointly and severally guaranteed on a full and
unconditional basis by all of our wholly-owned domestic
subsidiaries except Tandy Life Insurance Company. The
2019 Notes pay interest at a fixed rate of 6.75% per year.
Interest is payable semiannually, in arrears, on May 15 and
November 15. The 2019 Notes were sold to the initial
purchasers at a discount of $2.5 million for aggregate
consideration of $322.5 million, and resulted in net
proceeds to the Company of $315.4 million after the
payment of $7.1 million in issuance costs. The effective
annualized interest rate of the 2019 Notes after giving effect
to the original issuance discount is 6.875%.
The 2019 Notes and the guarantees are the Company’s
and the guarantors’ general unsecured senior obligations
and, therefore, will be subordinated to all of the Company’s
and the guarantors’ existing and future secured debt to the
extent of the assets securing that debt. In addition, the
2019 Notes will be effectively subordinated to all of the
liabilities of our subsidiaries that do not guarantee the 2019
Notes, to the extent of the assets of those subsidiaries.
The 2019 Notes contain covenants that could, in certain
circumstances, limit our ability to issue additional debt,
repurchase shares of our common stock, make certain
other restricted payments, make investments, or enter into
certain other transactions. At December 31, 2013, we were
in compliance with these covenants.
2016 Credit Facility: In August 2012 we entered into an
amended and restated asset-based credit agreement
(“2016 Credit Facility”) with a group of lenders with Bank of
America, N.A., as the administrative and collateral agent.
The 2016 Credit Facility originally matured on January 4,
2016, and provided for an asset-based revolving credit line
of $450 million, subject to a borrowing base. Obligations
under the 2016 Credit Facility were secured by substantially
all of our inventory, accounts receivable, cash, cash
equivalents, and certain real estate. No revolving
borrowings were made under the facility. The 2016 Credit
Facility was terminated in connection with the
establishment of our 2018 Credit Facility. We recognized a
loss on the termination of this facility in the amount of $1.8
million, classified as other loss, for unamortized deferred
credit facility fees.