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Guitar Center amends loan to reduce rates, push out maturity, add accordion feature
By Sara Rosenberg
New York, Feb. 11 - Guitar Center Inc. amended its credit facility, reducing the interest rate and the unused fee, extending the term to 2010 from 2007, adding an accordion feature that would allow the company to increase the facility size to $150 million from $125 million and increasing the letter-of-credit subfacility to $25 million, according to an 8-K filed with the Securities and Exchange Commission Friday.
Furthermore, the amendment reduced the prepayment premium in the credit agreement, modified limitations on investments by the company generally and in the cash equivalents definition, allowing for permitted acquisitions of up to $200 million and modifying reporting requirements.
The interest rate on the facility is based on excess availability. If excess availability is greater than $20 million, then the rate is Libor plus 100 basis points. If excess availability is less than or equal to $20 million but greater than $10 million, then the rate is Libor plus 125 basis points. And, if excess availability is less than or equal to $10 million, then the rate is Libor plus 150 basis points, the filing said.
The unused fee was reduced to 25 basis points.
The company entered into the amendment in connection with its pending acquisition of Music & Arts Center for $90 million, which the facility will help finance. The acquisition is expected to close in the second quarter and is subject to customary terms and conditions and the receipt of third-party consents.
Wells Fargo Retail Finance LLC is the agent on the deal.
The amendment became effective on Feb. 8.
Guitar Center is a Westlake Village, Calif.-based retailer of guitars, amplifiers, percussion instruments, keyboards and proaudio and recording equipment.
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