10.Debt

 

 

 

Revolving Credit Facility.    We have an unsecured revolving credit facility (the “credit facility”) with a borrowing capacity of $1.0  billion that 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.  Borrowings under the credit facility are either due ‘on demand’ or at maturity depending on the type of borrowing.  Borrowings with ‘on demand’ repayment terms are presented as short-term debt while amounts due at maturity are presented as long-term debt with expected repayments within the next fiscal year presented as a component of current portion of long-term debt.  As of May 31, 2015, the unused capacity of $999.2  million was fully available to us.

 

Term Loan.    In November 2014, we entered into a $300 million term loan with total outstanding principal due in November 2017.  The term loan accrues interest at variable rates based on the LIBOR rate, the federal funds rate, or the prime rate.  As of May 31, 2015, $300 million remained outstanding and no repayments are scheduled to be made within the next 12 months.  Borrowings under the loan are available for working capital and general corporate purposes.  We have entered into an interest rate derivative contract to manage our exposure to variable interest rates associated with this term loan.

 

Finance and Capital Lease Obligations.  Finance and capital lease obligations relate primarily to stores 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 new 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 the timing of principal collections and defaults 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, 2015,  $7.77 billion of non-recourse notes payable was outstanding related to term securitizations.  These notes payable accrue interest predominantly at fixed rates and have scheduled maturities through November 2021, but may mature earlier, depending upon the repayment rate of the underlying auto loan receivables. 

 

As of May 31, 2015, $1.09 billion of non-recourse notes payable was outstanding related to our warehouse facilities.  The combined warehouse facility limit was $2.3 billion, and unused warehouse capacity totaled $1.21 billion.  Of the combined warehouse facility limit, $800 million will expire in July 2015 and $1.5 billion will expire in February 2016.  The return requirements of 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.

 

Capitalized Interest.    We capitalize interest in connection with the construction of certain facilities.  We capitalized interest of $2.8 million in the first quarter of fiscal 2016; no interest was capitalized in the first quarter of fiscal 2015.

 

Financial Covenants.  The credit facility and term loan agreements contain 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, 2015, we were in compliance with all financial covenants and our securitized receivables were in compliance with the related performance triggers.