8-KMaterial AgreementsFinancial EventsExhibits & Filings

DOLLAR TREE, INC. 8-K Report, Material Agreement (Sep 26, 2016)

Filed September 26, 2016For Securities:DLTR

Summary

On September 22, 2016, Dollar Tree, Inc. (DLTR) announced a significant amendment to its senior secured credit facilities. The company entered into Amendment No. 4 to its credit agreement, which allows for the incurrence of $1,275 million in additional Term A-1 Loans and $750 million in new Term B-3 Loans. These new borrowings, along with a $242 million prepayment of existing Term B-1 Loans using cash on hand, effectively reduce the company's total outstanding debt by $242 million. This refinancing activity demonstrates Dollar Tree's proactive approach to managing its debt structure and improving its financial flexibility. While the new Term B-3 Loans introduce quarterly amortization payments starting in early 2017 and carry specific interest rate terms, the company anticipates significant annual interest savings of approximately $28 million as a result of these amendments and the debt prepayment. Investors should note the company will also recognize approximately $30 million in accelerated non-cash deferred financing costs and transaction-related expenses in connection with these actions.

Key Highlights

  • 1Dollar Tree amended its senior secured credit facilities, adding $1.275 billion in Term A-1 Loans and $750 million in Term B-3 Loans.
  • 2The company prepaid $242 million of existing Term B-1 Loans using cash on hand.
  • 3The net effect of these transactions is a reduction of total borrowed amounts under the credit agreement by $242 million.
  • 4New Term B-3 Loans will require quarterly amortization payments of 0.25% starting January 13, 2017.
  • 5The company expects to realize approximately $28 million in annual interest savings from these financing activities.
  • 6Dollar Tree will incur approximately $30 million in accelerated deferred financing costs and transaction expenses.

Frequently Asked Questions

The primary purpose of the amendment is to refinance a portion of Dollar Tree's existing debt, specifically Term B-1 Loans, by issuing new Term A-1 and Term B-3 Loans. This is accompanied by a cash prepayment of a portion of the Term B-1 Loans, resulting in an overall reduction of the company's total debt principal.

The transaction results in a net reduction of $242 million in the total amount borrowed under the credit agreement. Additionally, Dollar Tree anticipates approximately $28 million in annual interest savings due to the refinancing and debt prepayment.

The Term B-3 Loans bear interest at LIBOR plus 2.50% (or a base rate plus 1.50%). They will also require quarterly amortization payments of 0.25% of the original principal amount, commencing on January 13, 2017, until maturity.

Yes, Dollar Tree will recognize approximately $27 million in accelerated non-cash deferred financing costs and approximately $3 million in transaction-related costs. This totals about $30 million in expenses related to the financing amendments.