NOTE 4 — DEBT

Long-term debt as of May 5, 2013 and February 3, 2013 consisted of the following (dollars in millions):

	May 5, 2013				February 3, 2013
	Outstanding Principal			Interest Rate %(1)	Outstanding Principal			Interest Rate %(1)
Term Loans due 2017, net of unamortized discount of $22 million and $26 million as of May 5, 2013 and February 3, 2013, respectively	$	970		4.50	$	969		7.25
Senior ABL Facility due 2017	490			1.95	300			1.96
First Priority Notes due 2019, including unamortized premium of $20 million and $21 million as of May 5, 2013 and February 3, 2013, respectively	1,270			8.125	1,271			8.125
Second Priority Notes due 2020	675			11.00	675			11.00
October 2012 Senior Notes due 2020	1,000			11.50	1,000			11.50
February 2013 Senior Unsecured Notes due 2020	1,275			7.50	1,275			7.50
January 2013 Senior Subordinated Notes due 2021	950			10.50	950			10.50
2007 Senior Subordinated Notes due 2015	—			—	889			13.50
Total long-term debt	$	6,630			$	7,329
Less current installments	(10		)		(899		)
Long-term debt, excluding current installments	$	6,620			$	6,430

(1) Represents the stated rate of interest, without including the effect of discounts or premiums.

On February 15, 2013, HDS amended its Term Loan Facility (as defined below) to lower the borrowing margin by 275 basis points. The Term Loans (as defined below) are subject to an interest rate equal to LIBOR (subject to a floor of 1.25%) plus a borrowing margin of 3.25% or Prime plus a borrowing margin of 2.25% at the Company’s election. The amendment also replaced the hard call provision applicable to optional prepayment of Term Loans thereunder with a soft call option. The soft call option provides for a premium equal to 1.0% of the aggregate principal amount of Term Loans being prepaid if, on or prior to August 15, 2013, the Company enters into certain repricing transactions. In connection with the amendment, the Company paid approximately $30 million in financing fees, of which approximately $27 million will be amortized into interest expense over the remaining term of the amended facility in accordance with ASC 470-50, Debt-Modifications and Extinguishments. A portion of the amendment was considered an extinguishment, resulting in a $5 million loss on extinguishment of debt, which included approximately $2 million of fees, $2 million to write off the pro-rata portion of unamortized original issue discount, and $1 million to write off the pro-rata portion of unamortized deferred debt cost. The portion of the amendment considered a modification resulted in a charge of $1 million, which was reported as Other non-operating expense in the Consolidated Statement of Operations and Comprehensive Income (Loss).

On February 8, 2013, HDS redeemed its remaining $889 million outstanding aggregate principal amount of 2007 Senior Subordinated Notes at a redemption price equal to 103.375% of the principal amount thereof and paid accrued and unpaid interest thereon through the redemption date. As a result, in the first quarter of fiscal 2013, the Company incurred a $34 million loss on extinguishment, which includes a $30 million premium payment to redeem the 2007 Senior Subordinated Notes and approximately $4 million to write off the unamortized deferred debt cost.

Senior Credit Facilities

The Company’s Senior Term Facility consists of a senior secured Term Loan Facility (the ‘‘Term Loan Facility,’’ the term loans thereunder, the ‘‘Term Loans’’) providing for Term Loans in an aggregate principal amount of $1,000 million. The Term Loan Facility will mature on October 12, 2017 (the ‘‘Term Loan Maturity Date’’). The Term Loans will amortize in equal quarterly installments in aggregate annual amounts equal to 1% of the original principal amount of the Term Loan Facility with the balance payable on the Term Loan Maturity Date.

The Company’s Senior Asset Based Lending Facility (“Senior ABL Facility”) provides for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $1,500 million (subject to availability under a borrowing base). Extensions of credit under the Senior ABL Facility will be limited by a borrowing base calculated periodically based on specified percentages of the value of eligible inventory and eligible accounts receivable, subject to certain reserves and other adjustments. A portion of the Senior ABL Facility is available for letters of credit and swingline loans. As of May 5, 2013, HDS has $744 million of additional available borrowings under the Senior ABL Facility (after giving effect to the borrowing base limitations and approximately $61 million in letters of credit issued and including $47 million of borrowings available on qualifying cash balances).

The Senior ABL Facility also permits HDS to add one or more incremental term loan facilities to be included in the Senior ABL Facility or one or more revolving credit facility commitments to be included in the Senior ABL Facility. The Senior ABL Facility will mature on April 12, 2017.

Secured Notes

The Company’s 81/8% Senior Secured First Priority Notes due 2019 (the ‘‘First Priority Notes’’), bear interest at a rate of 81/8% per annum and will mature on April 15, 2019. Interest will be paid semi-annually in arrears on April 15th and October 15th of each year.

The Company’s 11% Senior Secured Second Priority Notes due 2020 (the ‘‘Second Priority Notes’’ and, together with the First Priority Notes, the ‘‘Secured Notes’’) bear interest at a rate of 11% per annum and will mature on April 15, 2020. Interest will be paid semi-annually in arrears on April 15th and October 15th of each year.

Unsecured Notes

The Company’s 11.5% Senior Notes due 2020 (the ‘‘October 2012 Senior Notes’’) bear interest at 11.5% per annum and will mature on July 15, 2020. Interest will be paid semi-annually in arrears on April 15th and October 15th of each year.

The Company’s 7.5% Senior Notes due 2020 (the ‘‘February 2013 Senior Unsecured Notes’’ and, together with the October 2012 Senior Notes, the ‘‘Unsecured Notes’’) bear interest at 7.5% per annum and will mature on July 15, 2020. Interest will be paid semi-annually in arrears on April 15th and October 15th of each year.

Senior Subordinated Notes

The Company’s 10.5% Senior Subordinated Notes due 2021 (the ‘‘January 2013 Senior Subordinated Notes’’) bear interest at 10.5%per annum and will mature on January 15, 2021. Interest will be paid semi-annually in arrears on April 15th and October 15th of each year.

Debt covenants

The Company’s outstanding debt agreements contain various restrictive covenants including, but not limited to, limitations on additional indebtedness and dividend payments and stipulations regarding the use of proceeds from asset dispositions. The Company is in compliance with all such covenants.

First Quarter 2012 Refinancing Transactions

On April 12, 2012, HDS consummated the following transactions (the ‘‘Refinancing Transactions’’) in connection with the refinancing of the senior portion of its debt structure:

· the issuance of $950 million of its 81/8% Senior Secured First Priority Notes due 2019;

· the issuance of $675 million of its 11% Senior Secured Second Priority Notes due 2020;

· the issuance of approximately $757 million of April 2012 Senior Notes due 2020;

· entry into a new senior term facility maturing in 2017 and providing for term loans in an aggregate principal amount of $1,000 million; and

· entry into a new senior asset based lending facility maturing in 2017 and providing for senior secured revolving loans and letters of credit of up to a maximum aggregate principal amount of $1,500 million (subject to availability under the borrowing base).

The proceeds of the First Priority Notes, the Second Priority Notes, the April 2012 Senior Notes, the Term Loan Facility and the Senior ABL Facility were used to (i) repay all amounts outstanding under the 2007 Senior Secured Credit Facility (Senior Secured Credit Facility dated as of August 30, 2007), (ii) repay all amounts outstanding under the 2007 ABL Credit Facility (ABL Credit Facility dated as of August 30, 2007), (iii) repurchase all remaining outstanding 2007 Senior Notes (12.0% Senior Notes dated as of August 30, 2007) and (iv) pay related fees and expenses.

Affiliates of certain of the Equity Sponsors owned an aggregate principal amount of approximately $484 million of the 2007 Senior Notes which they exchanged in a non-cash transaction for their investment in the April 2012 Senior Notes.

As a result of the Refinancing Transactions, the Company incurred $75 million in debt issuance costs and recorded a $220 million loss on extinguishment, which included a $150 million premium payment to redeem the 2007 Senior Notes, $46 million to write off the pro-rata portion of the unamortized deferred debt costs, and $24 million to write off the remaining unamortized asset associated with Home Depot’s guarantee of the Company’s payment obligations for principal and interest under the Term Loan under the 2007 Senior Secured Credit Facility that was terminated in the Refinancing Transactions.