10.Debt

 

 

 

Revolving Credit Facility.  Our $700 million unsecured revolving credit facility (the “credit facility”) expires in  August 2016.  Borrowings under the credit facility are available for working capital and general corporate purposes.  Borrowings accrue interest at variable rates based on LIBOR, the federal funds rate, or the prime rate, depending on the type of borrowing, and we pay a commitment fee on the unused portions of the available funds.  As of May 31, 2014, the remaining capacity was fully available to us.

 

Finance and Capital Lease Obligations.  Finance and capital lease obligations relate primarily to superstores subject to sale-leaseback transactions that did not qualify for sale accounting, and therefore, are accounted for as financings.  The leases were structured at varying interest rates and generally have initial lease terms ranging from 15 to 20 years with payments made monthly.  Payments on the leases are recognized as interest expense and a reduction of the obligations.  We have not entered into any sale-leaseback transactions since fiscal 2009.

 

Non-Recourse Notes Payable.  The non-recourse notes payable relate to auto loan receivables funded through term securitizations and our warehouse facilities.  The timing of principal payments on the non-recourse notes payable is based on principal collections, net of losses, on the securitized auto loan receivables.  The current portion of non-recourse notes payable represents principal payments that are due to be distributed in the following period.

 

As of May 31, 2014, $6.66 billion of non-recourse notes payable was outstanding related to term securitizations.  These notes payable accrue interest at fixed rates and have scheduled maturities through November 2020, but may mature earlier or later, depending upon the repayment rate of the underlying auto loan receivables. 

 

As of May 31, 2014, $964.0 million of non-recourse notes payable was outstanding related to our warehouse facilities.  The combined warehouse facility limit was $1.8 billion, and unused warehouse capacity totaled $836.0 million.  In July 2014, we increased the limit of one of our warehouse facilities by an additional $300.0 million.  Of the combined warehouse facility limit, $800.0 million will expire in August 2014 and $1.3 billion will expire in February 2015.  The return requirements of the warehouse facility investors could fluctuate significantly depending on market conditions.  At renewal, the cost, structure and capacity of the facilities could change.  These changes could have a significant impact on our funding costs.

 

See Notes 2 and 4 for additional information on the related securitized auto loan receivables.

 

Financial Covenants. The credit facility agreement contains representations and warranties, conditions and covenants.  We must also meet financial covenants in conjunction with certain of the sale-leaseback transactions.  Our securitization agreements contain representations and warranties, financial covenants and performance triggers.  As of May 31, 2014, we were in compliance with all financial covenants and our securitized receivables were in compliance with the related performance triggers.