IHOP 2010 Annual Report Download - page 121

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
by 0.25% and the insurance premium would increase by 0.05% each year during any such extension
period.
Series 2007-2 Variable Funding Notes
The Series 2007-2 VFN allowed for drawings on a revolving basis. Interest on the Series 2007-2
VFN was generally payable (a) in the event that commercial paper was issued to fund the Series 2007-2
VFN, at the rate, which was 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 were 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 that was determined by reference to the
British Banker’s Association Interest Settlement Rates for deposits in dollars for the applicable period.
It was expected that amounts would 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 a total of $25.0 million was drawn on the Series 2007-2 VFN. There was 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 were indirect wholly-owned subsidiaries of the Company that held
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’’) owned 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 were 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 were owned by IHOP Properties, LLC. The IHOP Co-Issuers 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 were expected to be repaid solely from these
subsidiaries’ assets, the March 2007 Notes were solely obligations of the IHOP Co-Issuers and none of
the Company, its direct or indirect subsidiaries, including the Real Estate Subsidiaries, guaranteed or
were 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
agreed, however, to guarantee the performance of the obligations of International House of
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