IHOP 2010 Annual Report Download - page 127
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DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
The proceeds received from the sale of the Applebee’s November 2007-1 Notes and the
Series 2007-3 FRN (collectively, the ‘‘Notes’’) were net of amounts paid to the purchaser of the Notes
who planned to resell these Notes.
Deferred Financing Costs
In connection with the March 2007 and November 2007 securitization transactions, the Company
recorded approximately $82.5 million of deferred financing costs. These deferred financing costs were
amortized using the effective interest method over the estimated life of the related debt. Amortization
of the deferred financing costs associated with the March 2007 and November 2007 securitization
transactions included in interest expense for the years ended December 31, 2010, 2009 and 2008 was
$14.5 million, $15.0 million and $17.0 million, respectively. Additionally, the unamortized balance of
$27.1million was charged against income as part of loss on the retirement of the related debt in
October 2010. For the years ended December 31, 2010, 2009 and 2008, amortization associated with
deferred financing costs of $2.0 million, $2.4 million and $0.3 million, respectively, was included in the
calculation of gain on retirement of debt. As of December 31, 2009, $42.5 million of deferred financing
costs was reported as Other Assets in the consolidated balance sheets.
Interest Rate Swap
On July 16, 2007, the Company entered into an interest rate swap (the ‘‘Swap’’), which was
intended to hedge the interest payments on the securitized notes that were issued in November 2007 to
finance the Applebee’s acquisition. The Swap had a notional amount of $2.039 billion and a fixed
interest rate of 5.694%.
In connection with the closing of the November 2007 securitized financing transactions, the
Company settled the Swap at a cost of $124.0 million. As a result of the Swap settlement, the Company
incurred interest expense on the undesignated portion of the Swap in an amount of $62.1 million in
2007, and amortized the designated portion of the Swap of $61.9 million into interest expense over the
expected four-year life of the Applebee’s November 2007-1 Notes and five-year life of IHOP
Series 2007-3 FRN. The remaining unamortized designated portion of the Swap of $21.6 million was
recognized as a loss upon the retirement of the related debt in October 2010.
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