Business Context and Reporting Period
Company: Take-Two Interactive Software, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: November 16, 2007
Event: Creation of a direct financial obligation via an Amended and Restated Credit Agreement with Wells Fargo Foothill, Inc.
Key Financial Metrics and Debt Structure
This filing details a restructuring of the company's revolving credit facility rather than reporting operational financial results (revenue, profit, or cash flow).
- Revolving Credit Facility Increase: Principal amount increased from $100,000,000 to $140,000,000.
- UK Subfacility: A new subfacility for Take-Two GB Limited established with a principal amount up to $25,000,000.
- Maturity Date: July 3, 2012.
- Interest Rates:
- Base Rate: 1.00% to 1.25% margin.
- LIBOR Rate: 2.25% to 2.50% margin.
- Collateral: Secured by substantially all assets of the Borrower and subsidiaries, including a pledge of up to 65% of equity interests in certain direct foreign subsidiaries.
Material Changes Versus Prior Period
The primary material change is the amendment and restatement of the credit agreement dated July 3, 2007. Key changes include:
- Capacity Expansion: The total available revolving credit increased by $40,000,000.
- New Subfacility: Introduction of a specific borrowing base for the UK subsidiary.
- Borrowing Base Calculation:
- U.S.: 85% of eligible accounts receivable + lesser of 65% of eligible inventory or $50,000,000 + $40,000,000.
- U.K.: 85% of eligible accounts receivable + lesser of 50% of eligible inventory or $4,000,000.
Guidance, Outlook, and Covenants
Use of Proceeds: Funds will be used for transactional fees, working capital, capital expenditures, and general corporate expenditures.
Covenants and Restrictions: The agreement imposes limitations on:
- Incurring additional indebtedness (with exceptions for permitted indebtedness).
- Disposing of assets outside the ordinary course of business.
- Mergers, acquisitions, or consolidations.
- Creation of liens on property.
- Investments and payment of dividends/distributions.
Financial Covenants: An interest coverage ratio requirement applies from January 31, 2008, if the 30-day average liquidity (including facility availability) falls below $30,000,000.
Risks: Events of default include nonpayment, breach of representations, noncompliance with covenants, insolvency, and defaults on other material contracts.
Investor Verification Checklist
- Verify the current utilization of the $140,000,000 facility and the $25,000,000 UK subfacility.
- Confirm the company's 30-day average liquidity to determine if the interest coverage ratio covenant is currently triggered.
- Review the specific definitions of "eligible accounts receivable" and "eligible inventory" to understand borrowing base limitations.
- Assess the impact of the new restrictions on dividends and future acquisitions on the company's strategic flexibility.