IHOP 2012 Annual Report Download - page 98

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
8. Long-Term Debt (Continued)
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Borrowings Under Senior Secured Credit Facility
Concurrent with Amendment No. 1, on February 25, 2011, the Company borrowed $742.0 million under the Term Facility
(the "New Term Loan"), retiring the amount then outstanding of the original $900.0 million borrowed under the Credit Agreement.
There was $472.0 million of the New Term Loan outstanding at December 31, 2012.
During 2012, the Company borrowed a total of $50.0 million under the Revolving Facility, all of which was repaid. As of
December 31, 2012, there were no amounts outstanding under the Revolving Facility; however, available borrowing capacity
under the Revolving Facility is reduced by $12.1 million of letters of credit outstanding as of December 31, 2012 pursuant to sub-
limits of the Credit Agreement.
Guarantees
The loans made under the Credit Agreement are guaranteed by the Company's domestic wholly-owned restricted subsidiaries,
other than immaterial subsidiaries (the "Guarantors"), and are secured by a perfected first priority security interest in substantially
all of the tangible and intangible assets of the Company and the Guarantors, including, without limitation, (i) substantially all
personal, real and mixed property, (ii) all intercompany debt owing to the Company and the Guarantors and (iii) 100% of the
equity interests held by the Company and each of the Guarantors (with customary limits for foreign subsidiaries), subject to certain
customary exceptions.
Mandatory Prepayment
Term Loans under the Credit Agreement are subject to the following prepayment requirements:
• Mandatory prepayments equal to 0.25% of the aggregate principal amount of the New Term Loan must be made on a
quarterly basis (1.0% for a fiscal year);
• 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).
Beginning with fiscal 2012, the percentage of excess cash flow required to be applied as a prepayment is subject to two
stepdowns: 25% of excess cash flow if the consolidated leverage ratio (as defined in the Credit Agreement) is less than 4.5:1 but
greater than or equal to 3:1 as of the end of the fiscal year; and 0% of excess cash flow if the consolidated leverage ratio is less
than 3:1 as of the end of the fiscal year. See Note 23, Subsequent Events.
The Credit Agreement permits the Company to purchase loans under the Term Facility pursuant to customary Dutch auction
provisions and subject to customary conditions and limitations.
Covenants/Restrictions
The Credit Agreement requires the Company to comply with certain financial covenants, including a minimum consolidated
interest coverage ratio and a maximum consolidated leverage ratio, in each case, commencing with the fiscal quarter ending
March 31, 2011. The Credit Agreement also includes certain negative covenants customary for transactions of this type, that restrict
the ability of the Company and the Company's existing and future restricted subsidiaries to, among other things, modify material
agreements and/or incur additional debt, incur liens, make certain investments and acquisitions, make fundamental changes, transfer
and sell assets, pay dividends and make distributions, modify the nature of the Company's business, enter into agreements with
shareholders and affiliates, enter into burdensome agreements, change the Company's fiscal year, make capital expenditures and
prepay certain indebtedness, subject to certain customary exceptions, including carve-outs and baskets. See Note 23, Subsequent
Events.
The Credit Agreement contains certain customary representations and warranties, affirmative covenants and events of default,
including change of control provisions and cross-defaults to other debt. Upon the occurrence of an event of default, the lenders,
by a majority vote, will have the ability to direct the Administrative Agent to terminate the loan commitments, accelerate all loans
and exercise any of the lenders' other rights under the Credit Agreement and the related loan documents on behalf of the lenders.
Effective Interest Rate
Taking into account fees and expenses associated with the Credit Agreement and Amendment No. 1 that will be 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%.