Dunkin' Donuts 2015 Annual Report Download - page 23

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competitive conditions;
• limiting our flexibility in planning for and reacting to changes in the industry in which we compete;
• placing us at a disadvantage compared to other, less leveraged competitors or competitors with comparable debt at
more favorable interest rates; and
• increasing our costs of borrowing.
In addition, the financial and other covenants we agreed to with our lenders may limit our ability to incur additional
indebtedness, make investments, and engage in other transactions, and the leverage may cause other potential lenders to be less
willing to loan funds to us in the future.
We may be unable to generate sufficient cash flow to satisfy our significant debt service obligations, which would adversely
affect our financial condition and results of operations.
Our ability to make principal and interest payments on and to refinance our indebtedness will depend on our ability to generate
cash in the future. This, to a certain extent, is subject to general economic, financial, competitive, legislative, regulatory and
other factors that are beyond our control. If our business does not generate sufficient cash flow from operations, in the amounts
projected or at all, or if future borrowings are not available to us under our variable funding notes in amounts sufficient to fund
our other liquidity needs, our financial condition and results of operations may be adversely affected. If we cannot generate
sufficient cash flow from operations to make scheduled principal amortization and interest payments on our debt obligations in
the future, we may need to refinance all or a portion of our indebtedness on or before maturity, sell assets, delay capital
expenditures or seek additional equity investments. If we are unable to refinance any of our indebtedness on commercially
reasonable terms or at all or to effect any other action relating to our indebtedness on satisfactory terms or at all, our business
may be harmed.
The terms of our securitized debt financing of certain of our wholly-owned subsidiaries have restrictive terms and our
failure to comply with any of these terms could put us in default, which would have an adverse effect on our business and
prospects.
Unless and until we repay all outstanding borrowings under our securitized debt facility, we will remain subject to the
restrictive terms of these borrowings. The securitized debt facility, under which certain of our wholly-owned subsidiaries issued
and guaranteed fixed rate notes and variable funding notes, contain a number of covenants, with the most significant financial
covenant being a debt service coverage calculation. These covenants limit the ability of certain of our subsidiaries to, among
other things:
• sell assets;
• alter the business we conduct;
• engage in mergers, acquisitions and other business combinations;
• declare dividends or redeem or repurchase capital stock;
• incur, assume or permit to exist additional indebtedness or guarantees;
• make loans and investments;
• incur liens; and
• enter into transactions with affiliates.
The securitized debt facility also requires us to maintain specified financial ratios. Our ability to meet these financial ratios can
be affected by events beyond our control, and we may not satisfy such a test. A breach of these covenants could result in a rapid
amortization event or default under the securitized debt facility. If amounts owed under the securitized debt facility are
accelerated because of a default and we are unable to pay such amounts, the investors may have the right to assume control of
substantially all of the securitized assets.
If we are unable to refinance or repay amounts under the securitized debt facility prior to the expiration of the applicable term,
our cash flow would be directed to the repayment of the securitized debt and, other than management fees sufficient to cover
minimal selling, general and administrative expenses, would not be available for operating our business.
No assurance can be given that any refinancing or additional financing will be possible when needed or that we will be able to
negotiate acceptable terms. In addition, our access to capital is affected by prevailing conditions in the financial and capital