Debt and Credit Agreements (Notes)

6 Months Ended

Aug. 01, 2015

Debt Disclosure [Abstract]

Debt and Credit Agreements

Debt and Credit Agreements

On February 4, 2015, Staples announced that it had signed a definitive agreement to acquire Office Depot, a global supplier of office products, services and solutions for the workplace. In connection with the proposed acquisition, the Company obtained financing commitments from Bank of America Merrill Lynch and Barclays Bank for a 5-year $3 billion asset-based revolving credit facility and a 6-year $2.75 billion term loan.  The Company has completed the syndications of the term loan and credit facility. The Company will close on the term loan and credit facility upon completion of the acquisition.  The asset-based revolving credit facility will replace the Company's existing $1 billion revolving credit facility.   The existing credit facility will remain in place in the event that the transaction is not completed.

Amounts outstanding under the asset-based revolving credit facility will bear interest equal to the one month London Interbank Offered Rate ("LIBOR") plus 1.75% for the first three months, and then ranging from LIBOR plus 1.25% to 1.75% thereafter depending on the amount of available borrowing capacity and the amount of outstanding borrowings and letters of credit.  The Company will also pay fees ranging from 0.25% to 0.375% on the undrawn portion of the credit facility.  The term loan will bear interest equal to the one year LIBOR (with a floor of 0.75%) plus 2.75%.  The agreements that govern the term loan and the credit facility contain various affirmative and negative covenants, including some that will require Staples to maintain certain financial ratios in certain circumstances.  In addition, the terms of the agreements will restrict Staples from paying dividends in certain circumstances and otherwise limit dividends to $0.15 per share per quarter, subject to certain exceptions.

With respect to the term loan, the Company will continue to incur certain commitment fees during 2015 in advance of closing on the loan. The Company's results for the second quarter of 2015 and first half of 2015 include $24 million and $28 million, respectively, of accrued commitment fees related to the term loan, which have been classified as interest expense. The Company expects to incur fees of approximately $25-30 million per quarter during the commitment period until the term loan agreement is either finalized or terminated. The commitment period expires on November 4, 2015, which may be extended until February 4, 2016 under certain conditions. Any such fees will be payable upon closing or termination of the proposed acquisition.