IHOP 2010 Annual Report Download - page 80

We may in the future enter into hedging agreements to mitigate the effect of changes in LIBOR
on variable interest rates.
Mandatory Repayments
Loans under the Credit Agreement are subject to the following repayment requirements:
• 1% per year of principal balance;
• 50% of excess cash flow (as defined in the Credit Agreement), paid, at a minimum, on an
annual basis; and
• 100% of asset sales and insurance proceeds (subject to certain exclusions).
We may voluntarily prepay loans under both the Term Facility and the Revolving Facility without
premium or penalty. However, if we make a voluntary prepayment within one year after the closing
date of the Credit Agreement in the case of the Revolving Facility, or one year after the February 2011
Refinancing in the case of the Term Facility, in any such case connection with any transaction that
results in a lower effective interest rate (as described above), we must pay a prepayment premium in an
amount equal to 1.0% of the principal amount prepaid, as applicable.
There are no mandatory repayments of the Notes, although under certain conditions we may be
required to repurchase Notes with excess proceeds of assets sales or upon a change of control, as
described in the Indenture under which the Notes were issued.
Debt Covenants
Pursuant to the Credit Agreement we will be required to comply with a maximum consolidated
leverage ratio and a minimum consolidated cash interest coverage ratio, beginning with the first quarter
of 2011. At that time, the Company’s required maximum consolidated leverage ratio of total debt (net
of unrestricted cash not to exceed $75 million) to adjusted EBITDA, on a trailing four-quarter basis,
will be 7.5x. Our required minimum ratio of adjusted EBITDA to consolidated cash interest, on a
trailing four-quarter basis, will be 1.5x. These thresholds become more rigorous over time. The
maximum consolidated leverage ratio will decline, in annual 25-basis-point-decrements, to 6.5x by the
first quarter of 2015, then to 6.0x for the first quarter of 2016 until the Credit Agreement expires in
October 2017. The minimum consolidated cash interest coverage ratio will increase to 1.75x
commencing in the first quarter of 2013 and to 2.0x commencing in the first quarter of 2016 and
remain at that level until the Credit agreement expires in October 2017.
There are no financial maintenance covenants associated with the Notes.
As noted above, we are not required to certify compliance with the maximum consolidated
leverage ratio and minimum consolidated cash interest coverage ratio covenants until delivery of the
financial statements for the quarter ended March 31, 2011. For the year ended December 31, 2010 our
consolidated leverage ratio was 5.73x and our consolidated cash interest coverage ratio was 2.16x.
The Notes, the Term Facility and the Revolving Facility are also subject to affirmative and negative
covenants considered customary for similar types of facilities, including, but not limited to, covenants
with respect to incremental indebtedness, liens, restricted payments (including dividends), investments,
affiliate transactions, and capital expenditures. These covenants are subject to a number of important
limitations, qualifications and exceptions. Importantly, certain of these covenants will not be applicable
to the Notes during any time that the Notes maintain investment grade ratings.
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