SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
FORM 8-K
CURRENT REPORT
PURSUANT TO SECTION 13 OR 15(d) OF
THE SECURITIES EXCHANGE ACT OF 1934
DATE OF REPORT: JUNE 12, 2002
VALUE CITY DEPARTMENT STORES, INC.
(EXACT NAME OF REGISTRANT AS SPECIFIED IN ITS CHARTER)
Ohio 1-10767 31-1322832
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(STATE OR OTHER (COMMISSION FILE NO.) (IRS EMPLOYER
JURISDICTION OF IDENTIFICATION NUMBER)
INCORPORATION OR
ORGANIZATION)
3241 Westerville Road
Columbus, Ohio 43224
(614) 471-4722
(ADDRESS, INCLUDING ZIP CODE, AND TELEPHONE NUMBER
INCLUDING AREA CODE OF REGISTRANT'S
PRINCIPAL EXECUTIVE OFFICES)
Not Applicable
(FORMER NAME OR FORMER ADDRESS, IF CHANGED SINCE LAST REPORT)
ITEM 5. OTHER ITEMS.
On June 12, 2002, Value City Department Stores, Inc. (the "Company")
together with its principal subsidiaries, announced the closing of a $525
million refinancing that consists of three separate credit facilities: (i) a new
three-year $350 million revolving credit facility agented by National City
Commercial Finance, Inc., Fleet Retail Finance Inc., Wells Fargo Retail Finance,
LLC, The CIT Group/Business Credit, Inc., and General Electric Capital
Corporation, (ii) a new three-year $100 million term loan facility provided
equally by Cerberus Partners, L.P. and Schottenstein Stores Corporation, and
(iii) an amended and restated $75 million senior convertible loan, initially
entered into by the Company on March 15, 2000, which will also be held equally
by Cerberus Partners and Schottenstein Stores Corporation. The maturity of the
senior convertible loan has, as part of the refinancing been extended to March
2009 from September 2003.
$350 Million Revolving Credit Facility
Under the Revolving Credit Facility, the borrowing base formula is
structured in a manner that allows the Company and its subsidiaries availability
based on the value of their inventories and receivables. Primary security for
the facility is provided by a first priority lien on all of the inventory and
accounts receivable of the Company, as well as certain intercompany notes and
payment intangibles. The facility also has a second priority perfected interest
in all of the collateral securing the Term Loans. Interest on borrowings is
calculated at the bank's base rate or Eurodollar rate plus 2.00% to 2.75%,
depending upon the level of average excess availability the Company maintains.
Initially the applicable Eurodollar margin is set at 2.25% for the first two
months of the facility. Based on the borrowing base formula the Company and its
subsidiaries currently have over $115 million of excess availability, after the
initial funding and the repayment or replacement of all borrowings and letters
of credit outstanding under the prior senior credit and subordinated credit
facilities.
$100 Million Term Loans
The Term Loans are comprised of a $50 million Term Loan B and a $50
million Term Loan C. All obligations under the Term Loan are senior debt,
ranking pari passu with the Revolving Facility and the Senior Convertible
Facility. The Company and its principal subsidiaries are obligated on the
facility.
The Term Loans stated rate of interest per annum during the initial two
years of the agreement is 14% if paid in cash and 15% if the paid-in-kind
("PIK") option is elected by the Company. During the first two years of this
facility, the Company may pay all interest by PIK. During the final year of the
Term Loan the stated rate of interest is 15.0% if paid in cash or 15.5% by PIK
and the PIK option is limited to 50% of the interest due.
The Company has agreed to issue to the Term Loan C Lenders warrants
("Warrants") to purchase shares of common stock initially exercisable for up to
8.75% of the shares of the
common stock outstanding on the closing date, excluding all outstanding
convertible securities, warrants, options or other equity equivalents, at an
initial exercise price of $4.50 per share. The number of shares issuable upon
the exercise of the Warrants and the per share exercise price are subject to
adjustment upon the occurrence of specified events. The Warrants are exercisable
at any time prior to the 10th anniversary of the date of issuance at the then
Warrant exercise price. The Company has granted the Term Loan C Lenders
registration rights with respect to the shares issuable upon exercise of the
Warrants.
The issuance of the Warrants is subject to shareholder approval.
Schottenstein Stores Corporation has agreed to vote its shares of Company common
stock in favor of the approval of the issuance of the Warrants.
$75 Million Senior Convertible Loan
The Company has amended and restated its $75 million Senior
Subordinated Convertible Loan Agreement dated March 15, 2000. As amended,
borrowings under the convertible loan will bear interest at 10% per annum. At
the Company's option, interest may be PIK from the closing date to the second
anniversary thereof, and thereafter, at the option of the Company, up to 50% of
the interest due may be PIK until maturity. The convertible loan is guaranteed
by all principal subsidiaries and is secured by a lien on assets junior to liens
granted in favor of the Revolving Credit Agreement and Term Loans. The Senior
Convertible Loan is not prepayable for five years from the closing date. The
agent has the right to designate two observers to the Board of Directors for so
long as the agent is the beneficial owner of at least 50% of the advances
initially made by it and has the right to designate two individuals to the Board
of Directors for so long as the agent is the beneficial owner of at least 50% of
the conversion shares issued upon conversion of the advances initially made by
it.
The convertible notes are convertible at the option of the holders into
shares of Value City Department Stores, Inc. common stock at a initial
conversion price of $4.50. The conversion price is subject to adjustment upon
the occurrence of specified events. The conversion of the Senior Convertible
Loan for shares representing in excess of 19.9% of the shares of Company common
stock currently outstanding is subject to shareholder approval. Schottenstein
Stores Corporation has agreed to vote its shares of Company common stock in
favor of the approval of such conversion rights.
The press release is included as Exhibit 99 to this Form 8-K and is
incorporated herein by this reference.
ITEM 7. FINANCIAL STATEMENTS AND EXHIBITS.
(c) EXHIBITS.
Exhibit No. Description
99 Press Release, dated June 12, 2002, entitled "Value
City Department Stores, Inc. Announces Refinancing."
SIGNATURES
Pursuant to the requirements of the Securities Exchange Act of 1934,
the Registrant has duly caused this report to be signed on its behalf by the
undersigned hereunto duly authorized.
VALUE CITY DEPARTMENT STORES, INC.
Date: June 12, 2002 By: /s/ James A. McGrady
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James A. McGrady, Chief Financial Officer
EXHIBIT INDEX
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Exhibit No. Description
99 Press Release, dated June 12, 2002, entitled
"Value City Department Stores, Inc.
Announces Refinancing."