IHOP 2008 Annual Report Download - page 116

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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
10. Debt (Continued)
March 2007 Securitization Transaction
On March 16, 2007, IHOP Franchising, LLC, a wholly owned subsidiary of the Company, and its
wholly owned subsidiary, IHOP IP, LLC (collectively, the ‘‘IHOP Co-Issuers’’), issued $175 million of
Series 2007-1 Fixed Rate Notes (the ‘‘Series 2007-1 FRN’’) and completed a securitized financing
facility providing for the issuance of up to $25 million of Series 2007-2 Variable Funding Notes (the
‘‘Series 2007-2 VFN’’ and together with the Series 2007-1 FRN, the ‘‘March 2007 Notes’’).
The March 2007 Notes were issued under a Base Indenture dated March 16, 2007 (the ‘‘IHOP
Base Indenture’’) and related Series Supplements, each dated March 16, 2007 (together with the Base
Indenture, the ‘‘Indenture’’) among the IHOP Co-Issuers and Wells Fargo Bank, National Association,
as the Indenture Trustee. The March 2007 Notes were issued in private transactions and are secured
under the Indenture by various types of collateral as described herein. The March 2007 Notes were the
first issuances under this program. While the Applebee’s notes (discussed below) are outstanding, the
IHOP Co-Issuers are not allowed to make additional borrowings through the sale of a new series of
notes under this program.
Series 2007-1 Fixed Rate Notes
The Series 2007-1 FRN have a stated fixed interest rate of 5.144% per annum, an anticipated
repayment date in March 2012, and a legal final payment date in March 2037. The effective interest
rate on the Series 2007-1 FRN is 7.218%, after taking account of the premium on the Insurance Policy
(described below under ‘‘Third Party Credit Enhancement’’) and the amortization of certain transaction
related expenditures. The anticipated repayment date of the Series 2007-1 FRN may be extended for
two successive one-year periods at the election of the IHOP Co-Issuers subject to satisfaction of certain
conditions as specified in the Indenture. The interest rate on the Series 2007-1 FRN would increase by
0.25% during any such extension period.
Series 2007-2 Variable Funding Notes
The Series 2007-2 VFN allow for drawings on a revolving basis. Interest on the Series 2007-2 VFN
will generally be payable (a) in the event that commercial paper is issued to fund the Series 2007-2
VFN, at the rate, which is the per annum rate equivalent to the weighted average of the per annum
rate payable by the commercial paper conduit in respect of promissory notes issued by the commercial
paper conduit to fund the Series 2007-2 VFN, and (b) in the event that other means are used to fund
the Series 2007-2 VFN, at per annum rates equal to (i) a base rate of either the prime rate or the
Federal funds rate, plus 0.40%, or (ii) a Eurodollar rate to be determined by reference to the British
Banker’s Association Interest Settlement Rates for deposits in dollars for the applicable period. It is
expected that amounts will be drawn under the Series 2007-2 VFN from time to time as needed by the
IHOP Co-Issuers in connection with the operation of the IHOP franchising business. As of
December 31, 2008 and 2007, a total of $15.0 million was drawn on the Series 2007-2 VFN. There is a
commitment fee on the unused portion of the Series 2007-2 VFN of 0.15% per annum.
March 2007 Securitization Structure
The IHOP Co-Issuers are indirect wholly-owned subsidiaries of the Company that hold
substantially all of the franchising assets used in the operation of the IHOP restaurant franchising
business. In connection with the securitization transaction, two other limited liability companies, IHOP
102