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Item 1.01
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Entry into a Material Definitive Agreement.
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Indenture
On April 16, 2020, Advance Auto Parts, Inc. (the “Company”) and the guarantors named therein (the “Guarantors”) entered into an indenture (the “Indenture”) with Wells Fargo Bank, National Association, a national bank association, as trustee, pursuant to which the Company issued its 3.900% Notes due 2030 (the “Notes”). See the discussion below under Item 2.03 for a description of the material terms and conditions of the Indenture, which information is hereby incorporated by reference herein.
Registration Rights Agreement
On April 16, 2020, the Company and the Guarantors entered into a registration rights agreement (the “Registration Rights Agreement”) with BofA Securities, Inc., SunTrust Robinson Humphrey, Inc. and J.P. Morgan Securities LLC pursuant to which the Company and the Guarantors agreed to use commercially reasonable efforts to:
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file, no later than 180 days after the issue date of the Notes, a registration statement with respect to a registered offer to exchange the Notes for new exchange notes, which will have terms substantially identical in all material respects to the Notes (except that the new exchange notes will not contain terms with respect to transfer restrictions and additional interest); and
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cause the exchange offer registration statement to be declared effective under the Securities Act of 1933, as amended (the “Securities Act”) within 255 days after the issue date of the Notes.
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Promptly after the exchange registration statement has been declared effective, the Company will commence its registered exchange offer.
The foregoing description of the Registration Rights Agreement does not purport to be complete and is qualified in its entirety by reference to the entire text of such agreement, a copy of which is filed hereto as Exhibit 4.2 and is incorporated by reference herein.
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Item 2.03
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Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
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The Notes are fully and unconditionally guaranteed, jointly and severally, on an unsecured senior basis, by each of the Company’s current and future domestic subsidiaries that from time to time guarantees the Company’s $1.0 billion unsecured revolving credit facility or certain other debt of the Company or a Guarantor.
The Notes bear interest at a rate of 3.900% per year. Interest on the notes is payable semi-annually in arrears on April 15 and October 15 of each year, commencing on October 15, 2020. The Company will pay interest to those persons who were holders of record on the April 1 or October 1 immediately preceding each interest payment date.
Prior to the January 15, 2030 (the “Par Call Date”), the Notes will be redeemable in whole or in part at any time and from time to time, at the Company's option, at a redemption price equal to the greater of (i) 100% of the principal amount of the Notes to be redeemed and (ii) the sum of the present values of the remaining scheduled payments of principal and interest on the Notes to be redeemed that would have been made if such Notes matured on the Par Call Date discounted to the date of redemption on a semi-
annual basis at the then-current treasury rate, plus 50 basis points, plus accrued interest thereon to but excluding the redemption date.
In addition, on or after the Par Call Date, the Notes will be redeemable in whole or in part at any time and from time to time, at the Company's option, at a redemption price equal to 100% of the principal amount of the Notes to be redeemed plus accrued interest thereon to but excluding the redemption date.
Upon the occurrence of a change of control triggering event, each holder of Notes will have the right to require the Company to purchase all or a portion of such holder’s Notes pursuant to a change of control offer at a purchase price equal to 101% of the principal amount thereof plus accrued and unpaid interest, if any, to the date of purchase.
The terms of the Indenture will, among other things, limit the ability of the Company and its subsidiaries to (i) create or incur debt secured by liens on their property or assets and (ii) enter into certain sale and leaseback transactions, and will limit the ability of the Company and the Guarantors to merge, sell, transfer, lease or convey all or substantially all of their property. These covenants are subject to a number of important limitations and exceptions that are described in the Indenture.
The Notes may be declared immediately due and payable by the trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding if any of the events set forth below occurs and is continuing, subject to certain qualifications and applicable grace periods as set forth in the Indenture:
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The Company fails to pay the principal amount or redemption price on a Note when such amount becomes due and payable.
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The Company fails to pay interest on any Note within 30 days of when such amount becomes due and payable.
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The Company fails to comply with any covenants or agreements in the Indenture or the Notes and such default continues for a period of 60 days after written notice by the trustee or the holders of 25% or more in aggregate principal amount of the Notes then outstanding.
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A default under other debt borrowed by the Company or any of its subsidiaries that results in an acceleration of the maturity of such debt, in an aggregate amount greater than $25.0 million at any time that any of the Company's previously issued notes are outstanding, or $75.0 million at any time that no such notes remain outstanding.
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Certain events of bankruptcy or insolvency occur, which affect the Company, a Guarantor or a significant subsidiary.
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A guarantee of the Notes is held in a judicial proceeding to be unenforceable or invalid, or a Guarantor denies or disaffirms its guarantee obligations.
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The foregoing description of the Indenture does not purport to be complete and is qualified in its entirety by reference to the entire text of such agreement, a copy of which is filed hereto as Exhibit 4.1 and is incorporated by reference herein.
On April 13, 2020, the Company issued a press release announcing the pricing of the private offering of the Notes, as described above under Item 1.01 and Item 2.03. A copy of this press release is furnished as Exhibit 99.1 to this report and is hereby incorporated by reference in this Item 8.01.
On April 16, 2020, the Company issued a press release announcing the closing of the private offering of the Notes, as described above under Item 1.01 and Item 2.03. A copy of this press release is furnished as Exhibit 99.2 to this report and is hereby incorporated by reference in this Item 8.01.