Dunkin' Donuts 2015 Annual Report Download - page 84

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transactions, such as certain asset sales and receipt of various insurance or indemnification proceeds, may trigger additional
mandatory prepayments.
It is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to February 2020,
subject to two additional one-year extensions. Borrowings under the Variable Funding Notes bear interest at a rate equal to a
base rate, a LIBOR rate plus 2.25%, or the lenders’ commercial paper funding rate plus 2.25%. If the Variable Funding Notes
are not repaid prior to February 2020 or prior to the end of an extension period, if applicable, incremental interest will accrue.
In addition, the Company is required to pay a 2.25% fee for letters of credit amounts outstanding and a commitment fee on the
unused portion of the Variable Funding Notes which ranges from 0.50% to 1.00% based on utilization.
As of December 26, 2015, approximately $744.4 million and $1.74 billion of principal were outstanding on the Class A-2-I
Notes and Class A-2-II Notes, respectively. Total debt issuance costs incurred and capitalized in connection with the issuance of
the Notes were $41.3 million. The effective interest rate, including the amortization of debt issuance costs, was 3.5% and 4.3%
for the Class A-2-I Notes and Class A-2-II Notes, respectively, at December 26, 2015.
Total amortization of debt issuance costs related to the securitized financing facility was $5.6 million for fiscal year 2015,
which is included in interest expense in the consolidated statements of operations.
As of December 26, 2015, $26.3 million of letters of credit were outstanding against the Variable Funding Notes, which relate
primarily to interest reserves required under the Indenture. There were no amounts drawn down on these letters of credit as of
December 26, 2015.
The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the
Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions
relating to optional and mandatory prepayments, including mandatory prepayments in the event of a change of control as
defined in the Indenture and the related payment of specified amounts, including specified make-whole payments in the case of
the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the
assets pledged as collateral for the Notes are in stated ways defective or ineffective, and (iv) covenants relating to
recordkeeping, access to information, and similar matters. As noted above, the Notes are also subject to customary rapid
amortization events provided for in the Indenture, including events tied to failure to maintain stated DSCR, failure to maintain
an aggregate level of Dunkin’ Donuts U.S. retail sales on certain measurement dates, certain manager termination events, an
event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date. The Notes
are also subject to certain customary events of default, including events relating to non-payment of required interest, principal,
or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain
bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain
judgments.
Senior credit facility
In February 2013, Dunkin’ Brands, Inc. (“DBI”), a subsidiary of DBGI, amended its senior credit facility, resulting in a
reduction of the interest rates and an extension of the maturity dates for DBI’s term loans and revolving credit facility. As a
result, during the first quarter of 2013, the Company recorded a loss on debt extinguishment and refinancing transactions of
$5.0 million, including $3.9 million related to the write-off of original issuance discount and debt issuance costs and $1.1
million of fees paid to third parties. The amended term loans were issued with an original issue discount of 0.25%, or $4.6
million, which was recorded as a reduction to long-term debt.
In February 2014, DBI amended its senior credit facility, resulting in a reduction of interest rates. As a result, during the first
quarter of 2014, the Company recorded a loss on debt extinguishment and refinancing transactions of $13.7 million, including
$10.5 million related to the write-off of original issuance discount and debt issuance costs and $3.2 million of fees paid to third
parties. The amended term loans were issued with an original issue discount of 0.25%, or $4.6 million, which was recorded as a
reduction to long-term debt. Total debt issuance costs incurred and capitalized in connection with this amendment were $1.2
million.
Total amortization of original issue discount and debt issuance costs related to the senior credit facility was $4.0 million and
$4.7 million for fiscal years 2014 and 2013, respectively, which is included in interest expense in the consolidated statements of
operations. The Company recorded an immaterial amount of amortization of original issue discount and debt issuance costs
related to the senior credit facility for fiscal year 2015.
As of December 27, 2014, $2.9 million of letters of credit were outstanding against the revolving credit facility. There were no
amounts drawn down on these letters of credit.
The proceeds from the issuance of the Class A-2 Notes were used to repay the remaining principal outstanding on the term
loans. During the first quarter of fiscal year 2015, the Company recorded a loss on debt extinguishment of $20.6 million,