True Value 2008 Annual Report Download - page 41

notes to consolidated financial statements
20 :: T RUE VALUE COMPA NY
Bank Facility
On November 30, 2006, True Value entered into a five-year
$250,000 senior secured revolving credit facility (“Bank Facility”)
maturing in 2011. True Value’s availability as of January 3, 2009 and
December 29, 2007 was $204,461 and $210,175, respectively.
The interest rate charged for the Bank Facility borrowings is
variable at either LIBOR or prime at True Value’s option, plus in
either case, an additional amount of interest determined based
on a performance-based pricing grid. As of January 3, 2009 and
December 29, 2007 this interest rate was 2.9% and 6.5%, respec-
tively. The average all-in rate charged for use of the Bank Facility
which includes the unused commitment fee and the letter of credit
fee was 4.5% and 7.0% for 2008 and 2007, respectively.
The Bank Facility imposes certain limitations on and requires
compliance with covenants from True Value that are usual and cus-
tomary for similar senior secured revolving credit facilities. Unless
such terms and conditions are waived by a majority of the lenders,
these terms and conditions include, among other things compli-
ance with quarterly financial covenants, limitations on additional
third-party debt, the granting of certain liens and guarantees,
investments, transactions with related parties and acquisitions
and periodic financial reporting requirements. Substantially all of
True Value’s assets, excluding property, plant & equipment, are
pledged as security for the Bank Facility. Management believes
it is in compliance with these requirements and is in compliance
with all terms and conditions of the Bank Facility.
Fees paid for obtaining the Bank Facility totaled $1,041 and these
fees are being amortized by True Value over the five-year term of
the Bank Facility. Upon entering into the Bank Facility in fiscal 2006,
True Value wrote off the remaining capitalized fees of $1,346 from
the asset-based revolving credit facility (“Prior Bank Facility”). The
Bank Facility refinanced the Prior Bank Facility of $275,000 with a
maturity date of August 2008. The Bank Facility provides True Value
with lower interest rates and administrative costs, less restrictive
terms and conditions, and certainty to its line of credit.
Mortgage Transaction
True Value has a mortgage on its Manchester, New Hampshire,
distribution center (the ”Mortgage”) with a balance at January 3,
2009 of $19,898. The Mortgage is a 20-year fully amortizing loan
at a fixed rate of 6.74% with a maturity date of January 1, 2026.
Subordinated Promissory and Subordinated
Promissory Installment Notes
Subordinated promissory notes are issued from time to time for
partial payment of the annual patronage dividend. Subordinated
promissory notes are subordinated to indebtedness to banking
institutions, trade creditors and other indebtedness of True Value
as specified by its board of directors. Historically, True Value has
extended an offer to note holders resulting in the maturities
of a significant portion of the notes due within one year being
extended at the option of the member, for a three-year period,
at interest rates established by True Value and substantially
equivalent to competitive market rates of comparable instru-
ments. In 2008 and 2007, approximately 81% and 85% of notes,
respectively, scheduled to mature in those years were extended
for an additional three years. True Value has not yet determined
whether it will continue to offer a similar option to members to
extend maturity dates in the future.
Subordinated promissory installment notes are issued in payment
of the redemption of qualified Class B common stock upon termi-
nation of membership in the cooperative (see Note 6, ”Members’
Equity – Capital Stock Redemption”).
Subordinated promissory and subordinated promissory install-
ment notes consisted of the following as of:
January 3, December 29,
($ in thousands) 2009 2007
Subordinated promissory notes at
interest rates from 4.50% to 8.00%,
maturing from 2008 to 2012 $ 53,818 $ 48,562
Accrued dividend notes liability 16,520 8,857
Subordinated promissory installment
notes at interest rates of 4.28% to
5.68% maturing from 2008 to 2012 10,053 13,995
Accrued stock redemption liability 1,596 1,214
81,987 72,628
Less amounts due within one year (18,095) (26,345)
$ 63,892 $ 46,283
Accrued dividend notes liability is subordinated promissory notes
that are issued as part of the settlement of the patronage dividend
for that fiscal year. For fiscal 2008, the subordinated promissory
notes that were issued with the distribution of the patronage div-
idend in 2009, bear an interest rate of 5.0% and mature in 2015.
For fiscal 2007, the subordinated promissory notes that were
issued with the distribution of the patronage dividend in 2008,
bear an interest rate of 5.0% and mature in 2012.
The scheduled amount due within one year for both years was
classified in Current maturities of long-term debt, notes and
capital lease obligations.
($ in thousands)