NOTE 5 — LONG-TERM DEBT

The Company’s long-term debt and capital lease obligations consisted of the following:


	December 1, 2012			February 25, 2012
8.00% Secured Term Loan Facility due August 2018	$	848		$	—
2.23% to 4.25% Revolving ABL Credit Facility due August 2017		636			—
3.74% to 5.00% Revolving Credit Facility and Variable Rate Notes due April 2015 – April 2018		—			1,074
8.00% Notes due May 2016		1,000			1,000
7.45% Debentures due August 2029		650			650
7.50% Notes due November 2014		490			490
6.34% to 7.15% Medium Term Notes due Feb 2013 – June 2028		434			440
8.00% Debentures due May 2031		400			400
8.00% Debentures due June 2026		272			272
8.70% Debentures due May 2030		225			225
7.75% Debentures due June 2026		200			200
7.25% Notes due May 2013		140			140
Accounts Receivable Securitization Facility		115			55
7.90% Debentures due May 2017		96			96
7.50% Notes due May 2012		—			282
Other		49			52
Net discount on debt, using an effective interest rate of 6.28% to 8.97%		(232	)		(216	)
Capital lease obligations		1,116			1,096

Total debt and capital lease obligations		6,439			6,256
Less current maturities of long-term debt and capital lease obligations		(259	)		(388	)

Long-term debt and capital lease obligations	$	6,180		$	5,868

Certain of the Company’s credit facilities and long-term debt agreements have restrictive covenants and cross-default provisions which generally provide, subject to the Company’s right to cure, for the acceleration of payments due in the event of a breach of a covenant or a default in the payment of a specified amount of indebtedness due under certain other debt agreements. The Company was in compliance with all such covenants and provisions for all periods presented.

On August 30, 2012, the Company entered into two new credit agreements: (i) a five-year $1,650 (subject to borrowing base availability) asset-based revolving credit facility (the “Revolving ABL Credit Facility”), secured by the Company’s inventory, credit card receivables and certain other assets, which will bear interest at the rate of London Interbank Offered Rate (“LIBOR”) plus 1.75 percent to 2.25 percent or prime plus 0.75 percent to 1.25 percent, with facility fees ranging from 0.25 percent to 0.375 percent, depending on utilization and (ii) a new six-year $850 term loan (the “Secured Term Loan Facility”), secured by a portion of the Company’s real estate and equipment, which will bear interest at the rate of LIBOR plus 6.75 percent and include a floor on LIBOR set at 1.25 percent. These agreements replaced the Company’s senior secured credit facilities, which were composed of a $1,500 revolving credit facility under which $280 was outstanding, scheduled to mature in April 2015, a $574 term loan B-2 scheduled to mature in October 2015 and a $446 term loan B-3 scheduled to mature in April 2018. On August 30, 2012, the Company paid and capitalized $59 in loan origination and financing costs which is included in Other Assets in the Condensed Consolidated Balance Sheets.

The Revolving ABL Credit Facility is guaranteed by certain of the Company’s material subsidiaries. To secure the obligations under the Revolving ABL Credit Facility, the Company has granted a perfected first-priority security interest for the benefit of the Revolving ABL Credit Facility lenders in its present and future inventory, credit card and certain other receivables, prescription files and related assets. In addition, the obligations under the Revolving ABL Credit Facility will be secured by second-priority liens on and security interests in the collateral securing the Secured Term Loan Facility, limited as required by the existing public indentures of the Company, such that the respective debt issued need not be equally and ratably secured.

The Secured Term Loan Facility is also guaranteed by certain of the Company’s material subsidiaries. To secure their obligations under the Secured Term Loan Facility, the Company granted a perfected first-priority mortgage lien and security interest for the benefit of the Secured Term Loan Facility lenders in certain of the Company’s owned or ground-leased real estate and the equipment located on such real estate. As of December 1, 2012, there was $1,081 of owned or ground-leased real estate and associated equipment pledged as collateral, classified in Property, plant and equipment, net in the Condensed Consolidated Balance Sheet. In addition, the obligations under the Secured Term Loan Facility are secured by second-priority secured interests in the collateral securing the Revolving ABL Credit Facility, subject to certain limitations to ensure compliance with the Company’s other outstanding debt instruments.

The loans under the Secured Term Loan Facility may be voluntarily prepaid at any time, subject to a prepayment fee in certain re-pricing circumstances. The Secured Term Loan Facility has required repayments, equal to 1.00 percent of the initial drawn balance each year, payable quarterly, with the entire remaining balance due at the six year anniversary of the inception date. In addition, the Company must apply net cash proceeds (as defined in the Secured Term Loan Facility) from certain types of asset sales in amounts ranging from 50 percent to 100 percent of the net cash proceeds of such transactions (excluding proceeds of the collateral security of the Revolving ABL Credit Facility and other secured indebtedness) to prepay the loans outstanding under the Secured Term Loan Facility. The Company must also prepay the loans outstanding by up to 50 percent of its annual excess cash flow (as defined in the Secured Term Loan Facility). As of December 1, 2012, the loans outstanding under the Secured Term Loan Facility had a remaining principal balance of $848 at LIBOR plus 6.75 percent and include a LIBOR floor of 1.25 percent, of which $9 was classified as current.

The Revolving ABL Credit Facility and Secured Term Loan Facility contain customary representations and warranties. These facilities also contain certain operating covenants, which restrict the ability of the Company to take certain actions without the permission of the lenders or as otherwise permitted under the facilities. Although these facilities do not require the Company to comply with any financial ratio maintenance covenants, if the excess availability is less than 10 percent of the aggregate commitments under the Revolving ABL Credit Facility, the Company is not permitted to borrow any additional amounts thereunder unless the Company meets a financial ratio set forth in the Revolving ABL Credit Facility.

As of December 1, 2012, there was $636 of outstanding borrowings under the Revolving ABL Credit Facility at rates ranging from LIBOR plus 2.00 percent to prime plus 1.00 percent. Facility fees under this facility were 0.375 percent. Letters of credit outstanding under the Revolving ABL Credit Facility were $354 at fees up to 2.125 percent and the unused available credit under the Revolving ABL Credit Facility was $599. As of December 1, 2012, there was $2,385 of inventories collateralized by the Revolving ABL Credit Facility, as well as all of the Company’s pharmacy scripts, included in Intangible assets, net and all credit card receivables of wholly-owned stores, included in Cash and cash equivalents in the Condensed Consolidated Balance Sheets.

In November 2011, the Company amended and extended its accounts receivable securitization program until November 2014. The Company can borrow up to $200 on a revolving basis, with borrowings secured by eligible accounts receivable, which remain under the Company’s control. As of December 1, 2012, there was $115 of outstanding borrowings under this facility at 2.01 percent. Facility fees on the unused portion are 0.70 percent. As of December 1, 2012, there was $285 of accounts receivable pledged as collateral, included in Receivables in the Condensed Consolidated Balance Sheet.

As of December 1, 2012 and February 25, 2012, the Company had $23 and $28, respectively, of debt with current maturities that are classified as long-term debt due to the Company’s intent to refinance such obligations with the Revolving ABL Credit Facility or other long-term debt.