Dollar General 2006 Annual Report Download - page 71

In June 2006, the Company amended its revolving credit facility to increase the
maximum commitment to $400 million and to extend the expiration date to June 2011. The
amended credit facility contains provisions that would allow the maximum commitment to be
increased to up to $500 million upon mutual agreement of the Company and its lenders. The
amended credit facility is unsecured. The Company has two interest rate options: base rate
(which is usually equal to prime rate) or LIBOR. The Company pays interest on funds borrowed
under the LIBOR option at rates that are subject to change based upon the ratio of the
Company’ s debt to EBITDA (as defined in the amended credit facility). Under the amended
credit facility, the facility fees can range from 10 to 20 basis points; the all-in drawn margin
under the LIBOR option can range from LIBOR plus 55 to 125 basis points; and the all-in drawn
margin under the base rate option can range from the base rate plus 10 to 20 basis points.
The amended credit facility contains financial covenants, which include limits on certain
debt to cash flow ratios, a fixed charge coverage test, and minimum allowable consolidated net
worth ($1.45 billion at February 2, 2007). In December 2006, the Company amended the
revolving credit facility to lower the fixed charge coverage test for future periods through fiscal
2008 to take into account the impact that the initiatives discussed in Note 2 related to
merchandising and real estate strategies may have on the ratio in those periods. As of February 2,
2007, the Company was in compliance with all of these covenants. During 2006 and 2005, the
Company had peak borrowings of $253.4 million and $100.3 million, respectively, under the
amended credit facility. As of February 2, 2007, the Company had no outstanding borrowings or
letters of credit outstanding under the amended credit facility.
In 2000, the Company issued $200 million principal amount of 8 5/8% Notes due June
2010 (the “Notes”). The Notes require semi-annual interest payments in June and December of
each year through June 15, 2010, at which time the entire balance becomes due and payable.
The Notes contain certain restrictive covenants. At February 2, 2007, the Company was in
compliance with all such covenants.
In July 2005, as an inducement for the Company to select Marion, Indiana as the site for
construction of a new DC, the Economic Development Board of Marion approved a tax
increment financing in the amount of $14.5 million. The principal amounts on this financing are
due to be repaid during fiscal years 2015 to 2035. Pursuant to this financing, proceeds from the
issuance of certain revenue bonds were loaned to the Company in connection with the
construction of this DC. The variable interest rate on this loan is based on the weekly
remarketing of the bonds, which are supported by a bank letter of credit, and ranged from 4.60%
to 5.43% in 2006 and from 3.52% to 4.60% in 2005.
At February 2, 2007 and February 3, 2006, the Company had commercial letter of credit
facilities totaling $200.0 million and $195.0 million, respectively, of which $116.1 million and
$85.1 million, respectively, were outstanding for the funding of imported merchandise
purchases. This merchandise is subject to lien until it is paid for by the Company.
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