IHOP 2010 Annual Report Download - page 124

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
if consent was obtained from the Series controlling party. Upon an extension, the interest rate on the
Applebee’s securitization debt would increase by 0.50%, and any unpaid amount would accrue interest
at such increased rate and the insurance premium would increase by 0.1%.
In the event that the Company was unable to refinance the Applebee’s securitization debt by
December 2012, or, if an extension had been obtained and the Company was unable to refinance the
Applebee’s securitization debt by June 2013, the debt would have gone into rapid amortization and all
excess cash flow (after defined required payments have been made) would have been 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 had 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 did not have the benefit of a financial guaranty
insurance policy. As of December 31, 2009 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 held 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, were solely the responsibility of these
indirect subsidiaries. Neither DineEquity, Inc., which was the ultimate parent of each of the subsidiaries
involved in the securitization, nor Applebee’s guaranteed or was 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 was insured under a financial guaranty
insurance policy issued by Assured Guaranty Corp. (‘‘Assured’’). The insurance policy was 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 were subject to a series of covenants and restrictions
under the Applebee’s Indenture which were 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
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