Business Context and Reporting Period
Company: Take-Two Interactive Software, Inc.
Filing Type: Form 8-K (Current Report)
Date of Report: August 24, 2005
Event: Entry into a new material definitive credit agreement and termination of a prior credit agreement.
Key Financial Metrics and Liquidity
This filing details a refinancing of the company's credit facility rather than reporting operational financial results (revenue, profit, or cash flow).
- New Credit Facility: Up to $50,000,000 line of credit with JPMorgan Chase Bank, N.A.
- Term: Expires August 23, 2006.
- Interest Rates: Prime rate plus 0.25% to 0.75%, or Eurodollar rate plus 1.25% to 1.75% (variable based on consolidated leverage ratio).
- Commitment Fee: 0.25% of the unused loan balance.
- Collateral: Accounts receivable, inventory, equipment, general intangibles, securities, and capital stock of material domestic and foreign subsidiaries.
- Outstanding Borrowings (Prior Facility): $0 at the time of termination.
Material Changes Versus Prior Period
The company replaced its prior line of credit with Bank of America, N.A. (originated in August 2002) with a new agreement with JPMorgan Chase Bank, N.A. on August 24, 2005. There were no outstanding borrowings under the terminated Bank of America agreement at the time of termination.
Guidance, Covenants, and Restrictions
The new credit agreement imposes specific financial covenants and operational restrictions:
- Financial Covenants: Maintenance of consolidated leverage ratio, consolidated interest coverage ratio, and consolidated asset coverage ratio.
- Restrictions: The agreement limits or prohibits declaring or paying cash dividends, merging or consolidating with another corporation, selling or acquiring assets (outside the ordinary course of business), creating liens, and incurring additional indebtedness.
Investor Verification Checklist
- Verify the company's current consolidated leverage ratio to determine the applicable interest rate margin.
- Confirm the amount of outstanding letters of credit, as these reduce the available borrowing capacity under the $50 million line.
- Review the specific thresholds for the financial covenants (leverage, interest coverage, asset coverage) to assess compliance risk.
- Monitor the company's ability to meet the restriction on paying cash dividends under the new agreement.