IHOP 2014 Annual Report Download - page 69

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per annum interest rate equal to the amount, if any, by which the sum of the following exceeds the Class A-2 Note interest rate:
(A) the yield to maturity (adjusted to a quarterly bond-equivalent basis) on the Class A-2 Anticipated Repayment Date of the
United States Treasury Security having a term closest to 10 years plus (B) 5.00% plus (C) 2.150%.
The Notes are secured by the collateral described below under “Guarantees and Collateral.”
Variable Funding Notes
In connection with the issuance of the Class A-2 Notes, the Co-Issuers also entered into a revolving financing facility that
allows for the drawings of up to $100 million of Variable Funding Notes and the issuance of letters of credit. The Variable
Funding Notes were issued under the Indenture and allow for drawings on a revolving basis. Drawings and certain additional
terms related to the Variable Funding Notes are governed by the Class A-1 Note Purchase Agreement dated as of September 30,
2014 (the “Variable Funding Note Purchase Agreement”), among the Co-Issuers, the Guarantors, certain conduit investors,
financial institutions and funding agents, and Cooperatieve Centrale Raiffeisen-Boerenleenbank, B.A. (“Rabobank
Nederdland”), New York Branch, as provider of letters of credit, as swingline lender and as administrative agent.
The Variable Funding Notes will be governed, in part, by the Variable Funding Note Purchase Agreement and by certain
generally applicable terms contained in the Indenture. Depending on the type of borrowing by the Co-Issuers, the applicable
interest rate under the Variable Funding Notes is calculated at a per annum rate equal to (a) LIBOR plus 2.50%, (b) (i) the
greatest of (x) the prime rate, (y) the federal funds effective rate plus 0.50% or (z) a daily rate equal to one month LIBOR plus
0.5% plus (ii) 2.00% or (c) the lenders’ commercial paper funding rate plus 2.50%. There is a scaled commitment fee based on
the unused portion of the Variable Funding Notes facility of between 50 to 100 basis points. It is anticipated that the principal
and interest on the Variable Funding Notes will be repaid in full on or prior to September 2019 (the “VFN Anticipated
Repayment Date”), subject to two additional one-year extensions at the option of the Company, which acts as the manager (as
described below), upon the satisfaction of certain conditions. Following the VFN Anticipated Repayment Date (and any
extensions thereof), additional interest will accrue on the Variable Funding Notes equal to 5.00% per annum. The Variable
Funding Notes and other credit instruments issued under the Variable Funding Note Purchase Agreement are secured by the
collateral described below under “Guarantees and Collateral.”
The Variable Funding Notes were undrawn upon issuance on September 30, 2014 and we have not drawn on them since
issuance. At December 31, 2014, approximately $9.6 million was pledged against the Variable Funding Notes for outstanding
letters of credit, leaving $90.4 million of Variable Funding Notes available for borrowings. The letters of credit are used
primarily to satisfy insurance-related collateral requirements.
Guarantees and Collateral
Under the Guarantee and Collateral Agreement dated September 30, 2014 (the “Guarantee and Collateral Agreement”),
among the Guarantors in favor of the Trustee, the Guarantors guarantee the obligations of the Co-Issuers under the Indenture
and related documents and secure the guarantee by granting a security interest in substantially all of their assets.
The Notes are secured by a security interest in substantially all of the assets of the Co-Issuers and the Guarantors
(collectively, the “Securitization Entities”). As of September 30, 2014, these assets (the “Securitized Assets”) generally
included substantially all of the domestic revenue-generating assets of the Company and its subsidiaries, which principally
consist of franchise agreements, area license agreements, development agreements, franchisee fee notes, equipment leases,
agreements related to the production and sale of pancake and waffle dry-mixes, owned and leased real property and intellectual
property.
The Notes are obligations only of the Co-Issuers pursuant to the Indenture and are unconditionally and irrevocably
guaranteed by the Guarantors pursuant to the Guarantee and Collateral Agreement. Except as described below, neither we nor
any of our subsidiaries, other than the Securitization Entities, guarantee or in any way are liable for the obligations of the Co-
Issuers under the Indenture or the Notes.
Covenants and Restrictions
The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the
Co-Issuers maintain specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions
relating to optional and mandatory prepayments, and the related payment of specified amounts, including specified make-whole
payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event,
among other things, the transfers of the assets pledged as collateral for the Notes are in stated ways defective or ineffective and