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SECURITIES AND EXCHANGE COMMISSION
WASHINGTON, D.C. 20549
F O R M 8-K
CURRENT REPORT
Pursuant to Section 13 or 15(d) of
the Securities Exchange Act of 1934
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Date of Report
July 31, 1996
NeoStar Retail Group, Inc.
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(Exact name of registrant as specified in its charter)
Delaware 0-25272 75-2559376
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(State or other jurisdiction (Commission (IRS Employer
of incorporation) File Number) Identification No.)
2250 William D. Tate Avenue, Grapevine, Texas 76051
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(Address of principal executive offices) (Zip Code)
Registrant's telephone number, including area code: (817) 424-2000
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ITEM 5. OTHER EVENTS.
Amendment of Credit Agreements.
On July 29, 1996 NeoStar Retail Group, Inc. (the "Company") entered into
an amendment (the "Fourth Amendment") of its existing Credit Agreement
("Revolving Credit Agreement") with a group of banks which initially provided
for a $70,000,000 revolving line of credit secured by all of the Company's
merchandise inventory and receivables from the sale of inventory. Prior to the
amendment, amounts borrowed thereunder bore interest at the lead bank's prime
interest rate plus .5 percent or at the appropriate LIBOR interest rate plus
two percent, at the Company's option. The maturity date of any advances under
the Revolving Credit Agreement was August 25, 1996. Advances under the
Revolving Credit Agreement, as amended on June 14, 1996, were limited to 50
percent of eligible inventory at times when the Company's inventory was less
than $120,000,000 and 45 percent of eligible inventory at times when the
Company's inventory was equal to or greater than $120,000,000.
The Fourth Amendment, among other things, extends the maturity date of
advances under the Revolving Credit Agreement from August 25, 1996 to February
21, 1997. The aggregate amount of the credit facility was reduced from
$70,000,000 to $55,000,000. Until October 31, 1996, amounts borrowed will bear
interest at the lead bank's prime interest rate plus one percent and thereafter
at the lead bank's prime interest rate plus 1.25 percent.
The Fourth Amendment also provides that the advance rate through November
15, 1996 will amount to 60 percent of eligible inventory, which percentage will
reduce periodically and incrementally thereafter to 30 percent of eligible
inventory at December 16, 1996.
Contemporaneously with the effectiveness of the Fourth Amendment, the
Company's Credit Agreement with a bank which provides for a term loan in the
initial principal amount of $20,000,000 (the "Term Loan Agreement") was also
amended in order to change the final maturity of the borrowings thereunder from
December 14, 1997 to February 21, 1997, a date which corresponds with the final
maturity of the borrowings under the Revolving Credit Agreement. The current
outstanding principal balance under the Term Loan Agreement is $14,000,000.
The Term Loan Agreement requires quarterly payments of principal in the amount
of $1,000,000 plus accrued and unpaid interest, which quarterly payments
commenced March 31, 1995.
Both the Revolving Credit Agreement and the Term Loan Agreement were also
amended in certain other respects, including provisions concerning reporting,
changes in financial covenants and the inclusion of additional types of assets
securing the borrowings thereunder.
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The Company is considering the proposal of another lender to provide a
credit facility which, if agreed upon, would replace the credit facilities
provided under the Revolving Credit Agreement and the Term Loan Agreement. The
proposed credit facility would also provide greater availability of borrowings
and would have more flexible financial covenants than currently provided under
the Revolving Credit Agreement. If the Company is unable to reach such an
agreement, or to obtain another replacement facility by February 1, 1997, a
material adverse effect on the Company's liquidity, results of operations, and
financial position would likely result. Management will also pursue and
consider other forms of financing for the Company.
Termination of Operations of Software Departments in Barnes & Noble Stores.
The Company and its wholly-owned subsidiary, Software Etc. Stores, Inc.
("Software") (the Company and Software together the "Sellers"), on the one
hand, and Barnes & Noble, Inc. ("B&N") and its wholly-owned subsidiaries Barnes
& Noble Superstores, Inc. ("B&N Superstores") and B. Dalton Bookseller, Inc.
("B. Dalton") (B&N, B&N Superstores and B. Dalton together the "Buyers"), on
the other hand, entered into an Asset Purchase Agreement dated as of July 29,
1996 (the "Agreement"). Under the terms of the Agreement, the obligations of
Software to continue to lease and operate an aggregate of 136 software
departments located in bookstores operated by B&N Superstores and B. Dalton,
most of which are located in book superstores operated by B&N Superstores, were
terminated effective as of the close of business on August 3, 1996.
As part of the transaction, the Buyers acquired all of the related
merchandise inventory for the software departments (other than the inventory of
video game systems, software for video game systems and other video game
related products) and substantially all furniture, fixtures, equipment and
other fixed assets of Software located in such software departments. In
consideration for such assets, the Buyers paid the Sellers a cash purchase
price of $9,000,000, which amount is subject to adjustment upon conclusion of a
physical inventory. The Company will incur a one-time non-cash charge of
approximately $2,700,000, which will be reflected in its second quarter ending
August 3, 1996, for certain equipment and other assets which will remain in the
departments for use by the Buyers.
Under the terms of the Agreement, the Sellers will serve as a supplier of
inventory for the Buyers as the Buyers may require. Software will continue to
operate 13 stores leased from B&N Superstores.
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SIGNATURES
Pursuant to the requirement 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.
NEOSTAR RETAIL GROUP, INC.
By: /s/ OPAL P. FERRARO
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Opal P. Ferraro
Chief Financial Officer,
Secretary and Treasurer
(Principal Financial and
Accounting Officer)
Dated: July 31, 1996
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