IHOP 2010 Annual Report Download - page 78

Liquidity and Capital Resources of the Company
We incurred approximately $2.3 billion of securitized indebtedness in connection with the 2007
acquisition of Applebee’s, of which approximately $1.6 billion remained outstanding as of October 19,
2010. This indebtedness had an accelerated repayment date of 2012, subject to certain short-term
extensions.
Credit Facilities
On October 8, 2010, we entered into a credit agreement with a group of lenders and financial
institutions (the ‘‘Credit Agreement’’) that established a senior secured credit facility (the ‘‘Senior
Secured Credit Facility’’) consisting of a $900 million term facility (the ‘‘Term Facility’’) maturing in
October 2017 and a $50 million senior secured revolving credit facility (the ‘‘Revolving Facility’’)
maturing in October 2015. Loans made under the Term Facility and the Revolving Facility will bear
interest, at our option, at an annual rate equal to (i) a LIBOR based rate (which will be subject to a
floor of 1.50%) plus a margin of 4.50% or (ii) the base rate (the ‘‘Base Rate’’) (which will be subject to
a floor of 2.50%), which will be equal to the highest of (a) the federal funds rate plus 0.50%, (b) the
prime rate and (c) the one month LIBOR rate (which will be subject to a floor of 1.50%) plus 1.00%,
plus a margin of 3.50%. As of December 31, 2010, the interest rate on the Term Facility was 6.0%. The
margin for the Revolving Facility is subject to debt leverage-based step-downs.
The Revolving Facility is utilized, among other purposes, to collateralize certain letters of credit we
are required to maintain that were previously collateralized with restricted cash. Such collateralization
does not constitute a draw-down under the Revolving Facility but does reduce the amount that can be
borrowed under the Revolving Facility. Unused amounts of the Revolving Facility bear interest at the
rate of 75 basis points per annum. As of December 31, 2010, no amounts were borrowed under the
Revolving Facility and approximately $25 million in letters of credit were collateralized by the
Revolving Facility.
The Credit Agreement also provides for an uncommitted incremental facility that permits the
Company, subject to certain conditions, to increase the Senior Secured Credit Facility by up to
$250 million; provided that the aggregate amount of the commitments under the Revolving Facility may
not exceed $150 million.
October 2010 Refinancing
On October 20, 2010, we completed a refinancing of our $1.6 billion of securitized indebtedness
using the following sources of funds:
• We borrowed $900 million under the Term Facility; and
• We issued $825 million of senior unsecured notes (the ‘‘Notes’’) at par that will mature in
October 2018 with a coupon of 9.5% per annum. Interest on the Company’s bonds is payable in
the months of April and October of each year, beginning in April 2011.
These borrowings, along with cash on hand not required for operating needs and previously
restricted cash becoming available concurrently with the retirement of the securitized debt totaled
approximately $1.85 billion.
We used these funds in the following manner:
• Repaid the entire $1.6 billion face value of securitized indebtedness outstanding as of
October 19, 2010;
• Paid $46.1 million of prepayment costs and tender premiums associated with the retirement;
• Redeemed 143,000 shares of our Series A Stock for $143 million;
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