IHOP 2013 Annual Report Download - page 101

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
7. 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,
retiring the amount then outstanding of the original $900.0 million borrowed under the Credit Agreement. Concurrent with
Amendment No. 2, on February 4, 2013, the Company borrowed $472.0 million under the Term Facility (the “New Term
Loan”), retiring the amount then outstanding of the amount borrowed under Amendment No. 1. There was $467.2 million of
the New Term Loan outstanding at December 31, 2013.
The Company did not utilize the Revolving Facility during 2013. As of December 31, 2013, there were no amounts
outstanding under the Revolving Facility; however, available borrowing capacity under the Revolving Facility was reduced by
$10.9 million of letters of credit outstanding as of December 31, 2013 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 Prepayments
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); and
• 50% of excess cash flow (as defined in the Credit Agreement or amendments thereto) if the consolidated leverage ratio is
5.75:1 or greater; 25% if the consolidated leverage ratio is less than 5.75:1 and greater than or equal to 5.25:1; and 0% if
the consolidated leverage ratio is less than 5.25:1.
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. The Company was in compliance with all financial covenants at December 31, 2013.
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, 2013 was 5.0%.