IHOP 2009 Annual Report Download - page 123

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
flow (after defined required payments have been made) will be retained by the indenture trustee for
the securitization and used to retire principal amounts of debt.
Series 2007-1 Class A-1 Variable Funding Senior Notes
The Applebee’s securitization also included a $100 million revolving credit facility of Series 2007-1
Class A-1 Variable Funding Senior Notes issued in two classes, with each drawdown allocated between
the two classes on a pro rata basis. The 2007-1 Class A-1-A Variable Funding Notes in an amount up to
$30 million have the benefit of a financial guaranty insurance policy covering payment of interest when
due and payment of principal at the legal final maturity date. The Series 2007-1 Class A-1-X Variable
Funding Notes in an amount up to $70 million do not have the benefit of a financial guaranty
insurance policy. As of December 31, 2009 and 2008, there was $100 million outstanding under this
facility, consisting of $30.0 million insured and $70.0 million uninsured.
Securitization Structure
All of the Applebee’s November 2007-1 Notes were issued by indirect subsidiaries of Applebee’s
that hold substantially all of the intellectual property, franchising assets and other restaurant assets of
the Applebee’s system and a certificate representing the right to receive a portion of the weekly
residual cash flow from the IHOP securitization program. The servicing and repayment obligations
related to the Applebee’s November 2007-1 Notes and certain ongoing fees and expenses, including the
premiums payable to the financial guaranty insurance company, are solely the responsibility of these
indirect subsidiaries. Neither DineEquity, Inc., which is the ultimate parent of each of the subsidiaries
involved in the securitization, nor Applebee’s has guaranteed or is in any way liable for the obligations
of the subsidiaries involved in the securitization, including the Applebee’s November 2007-1 Notes and
any other obligations of such subsidiaries arising in connection with the issuance of the Applebee’s
November 2007-1 Notes.
Third Party Credit Enhancement
Timely payment of interest (other than contingent interest) and the outstanding principal of the
Series 2007-1 Class A-2-II-A Fixed Rate Term Senior Notes are insured under a financial guaranty
insurance policy issued by Assured Guaranty Corp. (‘‘Assured’’). The insurance policy has been issued
under an Insurance and Indemnity Agreement among Assured, the Company and various subsidiaries
of the Company.
Covenants/Restrictions
The Applebee’s November 2007-1 Notes are subject to a series of covenants and restrictions under
the Applebee’s Indenture which are 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 Applebee’s November 2007-1 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 Applebee’s November 2007-1 Notes or removal of Applebee’s
Services, Inc., as servicer, among other things; (iii) optional prepayment subject to certain conditions;
(iv) 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
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