IHOP 2010 Annual Report Download - page 125

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
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 might have resulted in early payment 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 was the
surviving entity or the surviving entity assumed all of the Company’s obligations in connection with the
securitization transaction and certain other conditions were satisfied; (v) limitations on indebtedness
that might have been incurred by the Company on a consolidated basis; and (vi) recordkeeping, access
to information and similar matters. The Applebee’s November 2007-1 Notes were also subject to
customary events of default, including events relating to non-payment of interest and principal due on
or in respect of the Applebee’s November 2007-1 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.
IHOP Securitization
Series 2007-3 Fixed Rate Notes
On November 29, 2007, the IHOP Co-Issuers issued $245 million of Series 2007-3 Fixed Rate
Notes (the ‘‘Series 2007-3 FRN’’) in a securitized financing transaction. The Series 2007-3 FRN had an
expected life of five years, with a legal maturity of 30 years. This issuance was the third issuance of
debt securities by the IHOP Co-Issuers pursuant to a securitization structure established on March 16,
2007.
If the Company was unable to refinance the Series 2007-3 IHOP securitization debt by December
2012, then the Company would have had the ability to extend the scheduled repayment date for six
months if in compliance with applicable covenant ratios and system-wide sales levels at that time. Upon
extension, the interest rate on the Series 2007-3 IHOP securitization debt would have increased by
0.50% and any unpaid amount would have accrued interest at such increased rate.
In the event that the Company was unable to refinance the Series 2007-3 IHOP securitization debt
by December 2012, or, if an extension had not been obtained and the Company was unable to
refinance the Series 2007-3 IHOP 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.
The Series 2007-3 FRN were issued by the IHOP Co-Issuers, which held substantially all of the
intellectual property and franchising assets of the IHOP system. The servicing and repayment
obligations related to the Series 2007-3 FRN and certain on-going fees and expenses were solely the
responsibility of the IHOP Co-Issuers. DineEquity, Inc., which was the ultimate parent of each of the
IHOP Co-Issuers, had not guaranteed and was not in any way liable for the obligations of the IHOP
Co-Issuers, including the Series 2007-3 FRN, the March 2007 Notes or any other obligations of the
IHOP Co-Issuers incurred in connection with the issuance of the Series 2007-3 FRN or the March 2007
Notes. The Company did, however, guarantee the performance of International House of
Pancakes, LLC, as servicer for the IHOP securitization program.
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