IHOP 2012 Annual Report Download - page 70

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Liquidity and Capital Resources of the Company
Credit Facilities
In October 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 "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. The Credit Agreement also provides for an uncommitted incremental facility that permits us, subject to certain conditions,
to increase the Credit Facility by up to $250 million; provided that the aggregate amount of the commitments under the Revolving
Facility may not exceed $150 million.
The original interest rates provided for in the Credit Agreement were as follows: Loans made under the Term Facility ("Term
Loans") and the Revolving Facility ("Revolving Loans") bore interest, at our option, at an annual rate equal to (i) a LIBOR-based
rate (which was subject to a floor of 1.50%) plus a margin of 4.50% or (ii) the base rate (the "Base Rate") (which was subject to
a floor of 2.50%), which was 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 was subject to a floor of 1.50%) plus 1.00%, plus a margin of 3.50%. The margin for the Revolving Facility
was subject to debt leverage-based step-downs.
February 2011 Amendment
In February 2011, we entered into Amendment No. 1 ("Amendment No. 1") to the Credit Agreement. Pursuant to Amendment
No. 1, the interest rate margin applicable to LIBOR-based Term Loans was reduced from 4.50% to 3.00%, and the interest rate
floors used to determine the LIBOR and Base Rate reference rates for Term Loans were reduced from 1.50% to 1.25% for LIBOR-
based loans and from 2.50% to 2.25% for Base Rate-denominated loans. Given the relative stability of LIBOR rates since February
2011 and the amended rate floors, Amendment No. 1 effectively lowered our interest rate on LIBOR-based Term Loans from
6.00% to 4.25%, the rate in effect for all of 2012. Taking into account fees and expenses associated with the Credit Agreement
and Amendment No. 1 that are amortized as additional non-cash interest expense over a seven-year period, the weighted average
effective interest rate for the Credit Facility as of December 31, 2012 was 7.8%.
Amendment No. 1 did not change the interest rates on Revolving Loans, but it did increase the available lender commitments
under the Revolving Facility from $50 million to $75 million. The Revolving Facility is utilized, among other purposes, to
collateralize certain letters of credit we are required to maintain. 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.
Concurrent with Amendment No. 1, in February 2011, we borrowed $742 million under the Term Facility, retiring the same
amount of then-outstanding borrowings under the Credit Agreement. Pursuant to Amendment No. 1, our mandatory repayment
of 1% per year in effect as of December 31, 2012 was based on this balance of $742 million, as compared to the previous outstanding
balance of $900 million borrowed under the Credit Agreement.
Amendment No. 1 also modified certain restrictive covenants of the Credit Agreement, including those relating to repurchases
of other debt securities, permitted acquisitions and payments on equity.
Revolving Loans
During the year ended December 31, 2012, we borrowed and repaid a cumulative total of $50.0 million under the Revolving
Facility. On a daily weighted average basis there was $3.1 million outstanding under the Revolving Facility during 2012. The
annualized weighted average interest rate on borrowings under the Revolving Facility during 2012 was 6.55%. The highest balance
outstanding under the Revolving Facility at any point during 2012 was $25.0 million and there were no amounts outstanding under
the Revolving Facility as of December 31, 2012. Our available borrowing capacity under the Revolving Facility is reduced by
outstanding letters of credit, which totaled $12.1 million at December 31, 2012.
Mandatory Repayments
Term Loans under the Credit Agreement were subject to the following prepayment requirements :
• Mandatory prepayments equal to 0.25% of the aggregate principal amount of the Term Loan borrowing ($742.0 million
borrowed concurrent with Amendment No. 1) must be made on a quarterly basis (1.0% for a fiscal year);
• 50% of excess cash flow (as defined in the Credit Agreement) ("Excess Cash Flow"), paid, at a minimum, on an annual
basis; and
• 100% of asset sales and insurance proceeds (subject to certain exclusions).