Item 1.01 Entry into a Material Definitive Agreement.
The disclosures contained in Item 2.03 are incorporated herein by reference.
Item 2.03 Creation of a Direct Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
On December 4, 2007, Advance Auto Parts, Inc. ("the Company"), as Guarantor, entered into a new $200 million unsecured four-year term loan with Advance Stores Company, Incorporated ("Advance Stores"), the Company's wholly owned subsidiary serving as Borrower, the lenders party thereto, and JPMorgan Chase Bank, N.A., as administrative agent. Proceeds from this term loan will be used to repurchase shares of the Company's common stock under its stock repurchase program. Advance Stores borrowed $50 million on December 4, 2007 and has until May 5, 2008 to borrow the remaining capacity. Voluntary prepayments and voluntary reductions of the term loan balance are permitted in whole or in part, at the Company’s option, in minimum principal amounts as specified in the new term loan.
The interest rate on the term loan will be based, at the Company’s option, on an adjusted LIBOR rate, plus a margin, or an alternate base rate, plus a margin. The initial margin is 1.00% and 0.0% per annum for the adjusted LIBOR and alternate base rate borrowings, respectively. A commitment fee will be charged on the unused portion of the term loan, payable in arrears. The initial commitment fee rate is 0.200% per annum. Under the terms of the term loan, the interest rate spread and commitment fee will be based on the Company’s credit rating. The term loan terminates on October 5, 2011.
The term loan is guaranteed by the Company. The term loan contains covenants restricting the ability of the Company and its subsidiaries to, among other things, (1) create, incur or assume additional debt (including hedging arrangements), (2) incur liens or engage in sale-leaseback transactions, (3) make loans and investments, (4) guarantee obligations, (5) engage in certain mergers, acquisitions and asset sales, (6) engage in transactions with affiliates, (7) change the nature of the Company’s business and the business conducted by its subsidiaries and (8) change the holding company status of the Company. The Company is required to comply with financial covenants with respect to a maximum leverage ratio and a minimum coverage ratio. The term loan also provides for customary events of default, including non-payment defaults, covenant defaults and cross-defaults to the Company’s other material indebtedness.
The above description of the term loan is not complete and is qualified in its entirety by the full text of the term loan credit agreement, which is filed as Exhibit 10.30 to this Current Report on Form 8-K.
Item 9.01 Financial Statements and Exhibits.
