Comfort Inn 2013 Annual Report Download - page 91

Table of Contents
The Company may redeem the 2012 Senior Notes at its option at a redemption price equal to the greater of (a) 100% of the principal amount of the notes
to be redeemed and (b) the sum of the present values of the remaining scheduled principal and interest payments from the redemption date to the date of
maturity discounted to the redemption date on a semi-annual basis at the Treasury Rate, plus 50 basis points.
Senior Unsecured Notes Due 2020
On August 25, 2010, the Company issued unsecured senior notes in the principal amount of $250 million (“the 2010 Senior Notes”) at a discount of
$0.6 million, bearing a coupon of 5.7% with an effective rate of 6.19%. The 2010 Senior Notes will mature on August 28, 2020, with interest to be paid
semi-annually on February 28th and August 28th. The Company used the net proceeds from the offering, after deducting underwriting discounts and other
offering expenses, to repay outstanding borrowings and for other general corporate purposes. The Company’s 2010 Senior Notes are guaranteed jointly,
severally, fully and unconditionally, subject to certain customary limitations, by eight wholly-owned domestic subsidiaries.
Bond discounts incurred in connection with the 2010 Senior Notes are amortized on a straight-line basis, which is not materially different than the
effective interest method, through the maturity of the 2010 Senior Notes. Amortization of these costs is included in interest expense in the consolidated
statements of income.
The Company may redeem the 2010 Senior Notes at its option at a redemption price equal to the greater of (a) 100% of the principal amount of the notes
to be redeemed and (b) the sum of the present values of the remaining scheduled principal and interest payments from the redemption date to the date of
maturity discounted to the redemption date on a semi-annual basis at the Treasury Rate, plus 45 basis points.
Revolving Credit Facilities
On July 25, 2012, the Company entered into a $350 million senior secured credit facility, comprised of a $200 million revolving credit tranche (the
"New Revolver") and a $150 million term loan tranche (the "Term Loan") with Deutsche Bank AG New York Branch, as administrative agent, Wells Fargo
Bank, National Association, as administrative agent and a syndication of lenders (the "New Credit Facility"). The New Credit Facility has a final maturity
date of July 25, 2016, subject to an optional one-year extension provided certain conditions are met. Up to $25 million of the borrowings under the New
Revolver may be used for letters of credit, up to $10 million of borrowings under the New Revolver may be used for swing-line loans and up to $35 million of
borrowings under the New Revolver may be used for alternative currency loans. The Term Loan requires quarterly amortization payments (a) during the first
two years, in equal installments aggregating 5% of the original principal amount of the Term Loan per year, (b) during the second two years, in equal
installments aggregating 7.5% of the original principal amount of the Term Loan per year, and (c) during the one-year extension period (if exercised), equal
installments aggregating 10% of the original principal amount of the Term Loan.
The Company utilized the proceeds from the Term Loan and borrowings from the New Revolver, together with the net proceeds from the Company's
2012 Senior Notes offering, to pay during 2012 a special cash dividend of approximately $600.7 million in the aggregate to the Company's stockholders on
August 23, 2012.
The New Credit Facility is unconditionally guaranteed, jointly and severally, by certain of the Company's domestic subsidiaries. The subsidiary
guarantors currently include all subsidiaries that guarantee the obligations under the Company's Indenture governing the terms of its 2010 and 2012 Senior
Notes.
The New Credit Facility is secured by first priority pledges of (i) 100% of the ownership interests in certain domestic subsidiaries owned by the
Company and the guarantors, (ii) 65% of the ownership interests in (a) the top-tier foreign holding company of Choice's foreign subsidiaries and (b) the
domestic subsidiary that owns the top-tier foreign holding company of Choice's foreign subsidiaries and (iii) all presently existing and future domestic
franchise agreements (the “Franchise Agreements”) between the Company and individual franchisees, but only to the extent that the Franchise Agreements may
be pledged without violating any law of the relevant jurisdiction or conflicting with any existing contractual obligation of the Company or the applicable
franchisee. At the time that the maximum total leverage ratio is required to be no greater than 4.0 to 1.00 (beginning of year 4 of the New Credit Facility), the
security interest in the Franchise Agreements will be released.
The Company may at any time prior to the final maturity date increase the amount of the New Credit Facility by up to an additional $100 million to the
extent that any one or more lenders commit to being a lender for the additional amount and certain other customary conditions are met. Such additional
amounts may take the form of an increased revolver or term loan.
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