IHOP 2011 Annual Report Download - page 98

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Debt (Continued)
80
required to offer to purchase the Notes at a purchase price equal to 100% of the principal amount plus accrued and unpaid interest.
Covenants/Restrictions
The Indenture limits the ability of the Company and its restricted subsidiaries to incur additional indebtedness (excluding
certain indebtedness under the Credit Facility), issue certain preferred shares, pay dividends and make other equity distributions,
purchase or redeem capital stock, make certain investments, create certain liens on its assets to secure certain debt, enter into
certain transactions with affiliates, agree to any restrictions on the ability of the Company's restricted subsidiaries to make payments
to the Company, merge or consolidate with another company, transfer and sell assets, engage in business other than certain permitted
businesses and designate its subsidiaries as unrestricted subsidiaries, in each case as set forth in the Indenture. These covenants
are subject to a number of important limitations, qualifications and exceptions, including that during any time that the Notes
maintain investment grade ratings, certain of these covenants will not be applicable to the Notes.
The Indenture also contains customary event of default provisions including, among others, the following: default in the
payment of the principal of the Notes when the same becomes due and payable; default for 30 days in the payment when due of
interest on the Notes; failure to comply with certain covenants in the Indenture, in some cases without notice from the Trustee or
the holders of Notes; and certain events of bankruptcy or insolvency with respect to the Company or any significant restricted
subsidiary, in each case as set forth in the Indenture. In the case of an event of default, other than a bankruptcy default with respect
to the Company, the Trustee or the holders of at least 25% in aggregate principal amount of the Notes then outstanding, by written
notice to the Company (and to the Trustee if the notice is given by the holders of the Notes), may, and the Trustee at the written
request of the holders of at least 25% in aggregate principal amount of the Notes then outstanding shall, declare the principal of
and accrued interest on the Notes to be immediately due and payable.
Registration Rights Agreement for 9.5% Senior Notes due 2018
On the Closing Date, in connection with the issuance of the Notes, the Company entered into a Registration Rights Agreement
(the "Registration Rights Agreement"), by and among the Company, the Guarantors and Barclays Capital Inc. and Goldman,
Sachs & Co., as representatives of the initial purchasers of the Notes.
Pursuant to the Registration Rights Agreement, the Company and the Guarantors agreed to register with the SEC, exchange
notes (the "Exchange Notes"), having substantially identical terms as the Notes, as part of an offer to exchange freely tradable
Exchange Notes for the Notes. Pursuant to the Registration Rights Agreement, the Company and the Guarantors agreed to use
their commercially reasonable efforts to file an exchange offer registration statement with the SEC within 210 days from October
19, 2010, and to use their commercially reasonable efforts to cause it to become or be declared effective by the SEC no later than
270 days after October 19, 2010. The Company complied with this requirement by filing a Registration Statement on Form S-4
that was declared effective by the SEC on June 14, 2011.
Deferred Financing Costs
In connection with the Credit Agreement and the issuance of the Notes, the Company recorded approximately $28.2 million
of deferred financing costs. In connection with the increase to the Revolving Credit Facility the Company recorded an additional
$0.8 million of deferred financing costs. These deferred financing costs are being amortized using the effective interest method
over the estimated life of the related debt. Amortization of the deferred financing costs associated with the Credit Agreement and
the issuance of the Notes included in interest expense for the years ended December 31, 2011 and 2010 was $2.7 million and $0.6
million, respectively. Approximately $3.1 million and $0.8 million of deferred issuance costs were included in the determination
of loss on early retirement of Term Loan debt for the years ended December 31, 2011 and 2010, respectively. Approximately
$21.7 million and $26.8 million of deferred financing costs was reported as Other Assets in the consolidated balance sheets as of
December 31, 2011 and 2010, respectively.
Discount on Debt
The Company recorded a discount on debt from the October 2010 Refinancing of $29.6 million. In connection with the
Amendment, the Company recorded an additional discount of $7.4 million. The discount on debt reflects the difference between
the proceeds received from the issuance of the debt and the face amount to be repaid over the life of the debt. The discount will
be amortized as additional interest expense over the weighted average estimated life of the debt under the effective interest method.
For the years ended December 31, 2011 and 2010, $3.4 million and $0.6 million, respectively, of the discount was amortized as
additional interest expense under the effective interest method and an additional $3.1 million and $0.5 million, respectively, was
written off in connection with debt retirement and is reflected in the loss on extinguishment of debt in the consolidated statement
of operations.