True Value 2010 Annual Report Download - page 41

NOTES TO CONSOLIDATED FINANCIAL STATEMENTS
($ in thousands)
20 True Value Company
BANK FACILITY
On November 30, 2006, True Value entered into a $250,000 senior
secured revolving credit facility (“Bank Facility”). On November 2,
2010, True Value amended its Bank Facility to extend the maturity
into 2015. The terms and conditions of the amended Bank Facility
are substantially the same with no additional restrictions to True
Value’s business. The interest rate within the performance-based
pricing grid was increased on average up to 1.25% to be in line
with the current market levels. The composition of the banks in
the amended Bank Facility is substantially a subset of the original
bank group. True Value’s availability as of January 1, 2011 and
January 2, 2010 was $241,639 and $240,889, respectively, after
taking into account outstanding letters of credit.
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. At January 1, 2011 and
January2, 2010, True Value had no outstanding Bank Facility
borrowings and therefore, had no corresponding interest rate.
The average interest rate, based on a blend of London Interbank
Offering Rates (“LIBOR”) and prime charged for borrowings
under the Bank Facility were 2.3% and 1.6% for 2010 and 2009,
respectively. The average fees charged for use of the Bank Facility
were 0.2% for both 2010 and 2009.
The Bank Facility imposes certain limitations on and requires
compliance with covenants from True Value that are usual and
customary 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 compliance 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. Sub-
stantially all of True Value’s assets, excluding property, plant &
equipment, are pledged as security for the Bank Facility. Manage-
ment believes it is in compliance with these requirements and is
in compliance with all terms and conditions of the Bank Facility.
MORTGAGE TRANSACTION
True Value has a mortgage on its Manchester, New Hampshire,
distribution center (the “Mortgage”) with a balance at January 1,
2011 of $18,557. The Mortgage is a 20-year fully amortizing loan
at a fixed rate of 6.74% with a maturity date of January 1, 2026.
SUBORDINATED PROMISSORY AND SUBORDINATED
PROMISSORY INSTALLMENT NOTES
Subordinated promissory notes are issued from time to time for
partial payment of the annual patronage dividend. Subordinated
promissory notes are subordinated to indebtedness to banking
institutions, trade creditors and other indebtedness of True Value
as specified by its board of directors. Historically, True Value has
offered the members who own the subordinated promissory
notes with a scheduled maturity in December of the current year
the option to extend the maturity of their notes at a new rate for
an additional three years. Commencing in December 2009, True
Value offered its members improved liquidity on their invest-
ment in the co-op and offered members the option to extend
the term of their maturing notes for an additional six months. In
2010, notes maturing in June and December were extended for
an additional six months at rates of 5.0% and 4.0%, respectively,
and approximately 91% and 83%, respectively, of the maturing
note values were renewed. In 2009, notes maturing in December
were extended for an additional six months at rates of 5.0%, and
approximately 85% of the maturing note value was renewed. True
Value’s management makes no assertion that these high renewal
rates will continue in the future or that management will continue
to offer note renewal options.
Subordinated promissory installment notes are issued in pay-
ment of the redemption of qualified Class B common stock upon
termination of membership in the cooperative (see Note 6,
“Members’ Equity – Capital Stock Redemption”).
Subordinated promissory and subordinated promissory install-
ment notes consisted of the following as of:
January 1, January 2,
($ in thousands) 2011 2010
Subordinated promissory notes at
interest rates from 4.00% to 7.00%,
maturing from 2010 to 2017 $ 78,995 $ 65,536
Accrued dividend notes liability 24,082 20,754
Subordinated promissory installment
notes at interest rates of 2.72% to 5.68%
maturing from 2010 to 2015 11,215 10,431
Accrued stock redemption liability 1,248 738
115,540 97,459
Less amounts due within one year (39,214) (28,059)
$ 76,326 $ 69,400
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 2010, the subordinated promissory
notes that were issued with the distribution of the patronage
dividend in 2011, bear an interest rate of 5.5% and mature in
2019. For fiscal 2009, the subordinated promissory notes that
were issued with the distribution of the patronage dividend in
2010, bear an interest rate of 5.0% and mature in 2017.
The scheduled amount due within one year for both years was
classified in Current maturities of long-term debt, notes and
capital lease obligations.