IHOP 2009 Annual Report Download - page 121

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
claims in accordance with an order issued by the New York Insurance Department on November 24,
2009. While the insolvency of FGIC will not cause an event of default under the Indenture pursuant to
which the March 2007 Notes were issued, it will cause FGIC to cease being the controlling party with
respect to the March 2007 Notes and will require the IHOP Co-Issuers to obtain consent from a
majority of the Noteholders rather than FGIC for any actions to be taken with respect to the
securitization program, including amendments that require the consent of the controlling party.
March 2007 Covenants/Restrictions
The March 2007 Notes are subject to a series of covenants and restrictions under the Indenture
customary for transactions of this type, including those relating to (i) the maintenance of specified
reserve accounts to be used to make required payments in respect of the March 2007 Notes; (ii) certain
debt service coverage and consolidated leverage ratios to be met, the failure of which may result in
early amortization of the outstanding principal amounts due in respect of the March 2007 Notes or
removal of International House of Pancakes, Inc., as servicer, among other things; (iii) optional
prepayment subject to certain conditions; (iv) the Company’s maintenance of more than 50%
ownership interest in International House of Pancakes, LLC. and a restriction on the Company’s
merger with unaffiliated entities, unless the Company is the surviving entity or the surviving entity
assumes all of the Company’s obligations in connection with the securitization transaction and certain
other conditions are satisfied; (v) limitations on indebtedness that may be incurred by the Company on
a consolidated basis; and (vi) recordkeeping, access to information and similar matters. The March
2007 Notes are also subject to customary events of default, including events relating to non-payment of
interest and principal due on or in respect of the March 2007 Notes, failure to comply with covenants
within certain time frames, certain bankruptcy events, breach of representations and warranties, failure
of security interest to be effective, a valid claim being made under the relevant insurance policy and the
failure to meet the applicable debt service coverage ratio.
March 2007 Use of Proceeds
The net proceeds from the sale of the March 2007 Fixed Rate Notes on March 16, 2007 were
$171.7 million. Of this amount, $114.2 million was used to repay existing indebtedness of the Company;
$2.4 million was deposited into an interest reserve account for the Series 2007-1 FRN; and $3.1 million
was deposited into a lease payment account for payment to third-party property lessors. The Company
used the remaining proceeds primarily to pay the costs of the transaction and for share repurchases. In
November, 2007, a total of $15.0 million was drawn on the Series 2007-2 VFN which was used as part
of the payment for the Applebee’s acquisition. The remaining $10.0 million balance on the
Series 2007-2 VFN was subsequently drawn in June 2009 and used to repurchase debt on the open
market.
November 2007 Securitization Transactions
As part of the financing for the Applebee’s acquisition, certain subsidiaries of the Company
completed two separate securitization transactions with total proceeds of $2.039 billion. The
securitization transactions consisted of an issuance of debt collateralized by Applebee’s restaurant assets
and a separate issuance of debt collateralized by IHOP restaurant assets under the IHOP securitization
program.
102