Barnes and Noble 2005 Annual Report Download - page 31

5. DEBT
On June 17, 2005, the Company, together with certain of its
subsidiaries, entered into a Credit Agreement (the New
Facility) with a syndicate led by Bank of America, N.A. and
JPMorgan Chase Bank, N.A. The New Facility replaces the
Amended and Restated Credit and Term Loan Agreement,
dated as of August 10, 2004 (the Prior Facility), which
consisted of a revolving credit facility and a term loan. The
revolving credit facility portion was due to expire in May
2006 and the term loan had a maturity date of August 10,
2009. The Prior Facility was terminated on June 17, 2005, at
which time the prior outstanding term loan of $245,000 was
repaid. Letters of credit issued under the Prior Facility, which
totaled approximately $30,000 as of June 17, 2005, were
transferred to become letters of credit under the New Facility.
The New Facility provides for a maximum aggregate
borrowing amount of $850,000 (which under certain
circumstances may be increased to $1,000,000 at the option
of the Company) and terminates on June 16, 2010. The
maximum aggregate borrowing amount may be reduced
from time to time according to the terms of the New Facility.
Borrowings made pursuant to the New Facility may be
committed loans or swing line loans, the combined sum
(including any outstanding letters of credit) of which may not
exceed the maximum borrowing amount.
Borrowings made pursuant to the New Facility as
committed loans will bear interest, payable quarterly or, if
earlier, at the end of any interest period, at either (a) the
base rate, described in the New Facility as the higher of
Bank of America N.A.’s prime rate (7.25% as of January
28, 2006) or the federal funds rate (4.38% as of January
28, 2006) plus 0.50%, or (b) the Eurodollar rate (a
publicly published rate which amounted to 4.57% as of
January 28, 2006) plus a percentage spread (ranging from
0.750% to 1.375%) based on the Company’s consolidated
fixed charge coverage ratio. Swing line loans bear interest
at the base rate. Under the New Facility, the Company
agrees to pay a commitment facility fee, payable quarterly,
at rates that range from 0.150% to 0.300% depending on
the Company’s consolidated fixed charge coverage ratio.
The payments under the New Facility are guaranteed by
material subsidiaries of the Company.
The New Facility contains customary affirmative and
negative covenants for credit facilities of this type,
including limitations on the Company and its subsidiaries
with respect to indebtedness, liens, investments,
distributions, mergers and acquisitions, disposition of
assets, sale-leaseback transactions, and transactions with
affiliates. The New Facility permits the Company to use
proceeds of the credit loans and letters of credit for
working capital and capital expenditures and for all other
lawful corporate purposes, including payment of
dividends, acquisitions of assets, capital stock of other
companies and share repurchases, in each case to the
extent permitted in the New Facility. The New Facility also
contains financial covenants that require the Company to
maintain a minimum consolidated fixed charge coverage
ratio of 1.75 and a maximum consolidated funded debt to
earnings ratio of 2.00.
The New Facility provides for customary events of default
with corresponding grace periods, including failure to pay
any principal or interest when due, failure to comply with
covenants, any material representation or warranty made
by the Company proving to be false in any material
respect, certain bankruptcy, insolvency or receivership
events affecting the Company or its subsidiaries, defaults
relating to certain other indebtedness, imposition of
certain judgments and a change in control of the
Company (as defined in the New Facility).
On June 28, 2004, the Company completed the
redemption of its $300,000 outstanding 5.25%
convertible subordinated notes due 2009. Holders of
the notes converted a total of $17,746 principal amount
of the notes into 545,821 shares of common stock of
the Company, plus cash in lieu of fractional shares, at a
price of $32.512 per share. The Company redeemed the
balance of $282,254 principal amount of the notes at
an aggregate redemption price, together with accrued
interest and redemption premium, of $294,961. The
write-off of the unamortized portion of the deferred
financing fees from the issuance of the notes and the
redemption premium resulted in a charge of $14,582.
Selected information related to the Company’s term
loan, convertible subordinated notes and the New and
Prior Facilities:
Fiscal Year 2005 2004 2003
Revolving credit facility
$ — — —
Term loan — 245,000 —
Convertible subordinated note — — 300,000
Balance at end of year $ — 245,000 300,000
Average balance outstanding
during the year $121,915 276,043 342,469
Maximum borrowings outstanding
during the year $245,000 392,700 474,150
Weighted average interest rate
during the year 6.91% 5.25% 6.33%
Interest rate at end of year — 3.78% 5.25%
[NOTES TO CONSOLIDATED FINANCIAL
STATEMENTS continued ]
30 2005 Annual ReportBarnes & Noble, Inc.