IHOP 2009 Annual Report Download - page 120

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
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, 2009 and 2008, a total of $25.0 million and $15.0 million, respectively, 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
Property Leasing, LLC and IHOP Real Estate, LLC, were formed as subsidiaries of IHOP
Franchising, LLC and an existing subsidiary, IHOP Properties, Inc., was transferred to IHOP
Franchising, LLC and converted to a limited liability company. On and after the closing of the
securitization transaction, these three subsidiaries (the ‘‘Real Estate Subsidiaries’’) own the real
property assets related to the IHOP restaurant franchising business, including the fee and leasehold
interests on the real property on which many IHOP restaurants are located and the related leases and
sub-leases, respectively, to franchisees.
In connection with the March 2007 Securitization Transaction, the franchise agreements, franchise
notes, area license agreements (related to the United States and Mexico), product sales agreements,
equipment leases and other assets related to the IHOP restaurant franchising business were transferred
to IHOP Franchising, LLC, the intellectual property related to the IHOP restaurant franchising
business, among other things, was transferred to IHOP IP, LLC, the fee interests in real property and
related franchisee leases were transferred to IHOP Real Estate, LLC and certain of the leasehold
interests related to the IHOP franchised restaurants and the related subleases to franchisees were
transferred to IHOP Property Leasing, LLC. The remaining leasehold interests and franchisee
subleases are owned by IHOP Properties, LLC. The IHOP Co-Issuers have pledged all of their assets
to the Indenture Trustee as security for the March 2007 Notes and any additional notes issued by the
IHOP Co-Issuers. Although the March 2007 Notes are expected to be repaid solely from these
subsidiaries’ assets, the March 2007 Notes are solely obligations of the IHOP Co-Issuers and none of
the Company, its direct or indirect subsidiaries, including the Real Estate Subsidiaries, guarantee or are
in any way liable for the IHOP Co-Issuers’ obligations under the Indenture, the March 2007 Notes or
any other obligation in connection with the issuance of the March 2007 Notes. The Company has
agreed, however, to guarantee the performance of the obligations of International House of
Pancakes, LLC., its wholly-owned direct subsidiary, as servicer in connection with the servicing of the
assets included as collateral under the Indenture and certain indemnity obligations relating to the
transfer of the collateral assets to the IHOP Co-Issuers and the Real Estate Subsidiaries.
March 2007 Third Party Credit Enhancement
Timely payment of interest (other than contingent interest) and the outstanding principal of the
March 2007 Notes were insured under a financial guaranty insurance policy issued by Financial
Guaranty Insurance Company (‘‘FGIC’’) under an Insurance and Indemnity Agreement among FGIC,
the Company and various subsidiaries of the Company. There are concerns about the solvency of FGIC
and the effectiveness of the insurance policy as FGIC is presently required to suspend payment on all
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