8-KFinancial EventsOther Events

DOLLAR GENERAL CORP 8-K Report, Financial Obligation (Jul 18, 2011)

Filed July 18, 2011For Securities:DG

Summary

Dollar General Corporation (DG) filed an 8-K on July 15, 2011, to report the redemption of its 10.625% Senior Notes due 2015. The company redeemed the entire $839.3 million principal amount of these notes for approximately $928.5 million, including accrued interest. This action was taken in accordance with the note indenture and followed a prior repurchase of $25 million in notes in April 2011. The redemption was financed through a combination of cash on hand and approximately $300 million borrowed under the company's senior secured asset-based revolving credit facility (ABL Facility). Management expects to record a pre-tax, non-operating loss of around $60 million for fiscal year 2011 related to these redemption and repurchase activities. The company also indicated it may draw up to an additional $400 million under its ABL Facility in fiscal 2011.

Key Highlights

  • 1Dollar General redeemed all $839.3 million in aggregate principal of its 10.625% Senior Notes due 2015.
  • 2The total cost of the redemption, including accrued interest, was approximately $928.5 million.
  • 3The redemption was funded by cash on hand and $300 million in borrowings from the company's ABL Facility.
  • 4An estimated $60 million in pre-tax, non-operating losses are expected for fiscal 2011 due to this redemption and a prior repurchase.
  • 5The company anticipates potential additional borrowings of up to $400 million outstanding at any time under its ABL Facility in fiscal 2011.

Frequently Asked Questions

The filing indicates the redemption was effected in accordance with the indenture governing the Notes. While the specific strategic reason isn't detailed in this 8-K, such actions often occur due to favorable market conditions for refinancing debt at lower interest rates, or to reduce upcoming interest payment obligations.

The company financed the redemption using a combination of existing cash reserves and approximately $300 million borrowed under its senior secured asset-based revolving credit facility (ABL Facility).

Dollar General expects to record a pre-tax, non-operating loss of approximately $60 million for fiscal year 2011. This loss accounts for the redemption of the 2015 Notes and a prior repurchase of $25 million in notes.

Borrowing under the ABL Facility suggests Dollar General is utilizing its revolving credit line for immediate cash needs, in this case, to facilitate the debt redemption. The company's indication of potential further borrowings up to $400 million suggests a need for ongoing liquidity or strategic financial management.