IHOP 2014 Annual Report Download - page 96

DineEquity, Inc. and Subsidiaries
Notes to the Consolidated Financial Statements (Continued)
7. Long-Term Debt (Continued)
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credit. The Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “Notes.” The Notes were issued
in a securitization transaction pursuant to which substantially all of our domestic revenue-generating assets and our domestic
intellectual property, are held by the Co-Issuers and certain other special-purpose, wholly-owned indirect subsidiaries of the
Company (the “Guarantors”) that act as guarantors of the Notes and that have pledged substantially all of their assets to secure
the Notes.
Class A-2 Notes
The Notes were issued under a Base Indenture, dated September 30, 2014 (the “Base Indenture”) and the related Series
2014-1 Supplement to the Base Indenture, dated September 30, 2014 (the “Series 2014-1 Supplement”), among the Co-Issuers
and Citibank, N.A., as the trustee (in such capacity, the “Trustee”) and securities intermediary. The Base Indenture and the
Series 2014-1 Supplement (collectively, the “Indenture”) will allow the Co-Issuers to issue additional series of notes in the
future subject to certain conditions set forth therein.
While the Notes are outstanding, payment of principal and interest is required to be made on the Class A-2 Notes on a
quarterly basis. The payment of principal on the Class A-2 Notes may be suspended when the leverage ratio for the Company
and its subsidiaries is less than or equal to 5.25x. In general, the leverage ratio is our indebtedness (assuming all variable
funding facilities are fully drawn) divided by adjusted EBITDA for the four preceding quarterly periods. As of December 31,
2014, the Company's leverage ratio was 4.8x; accordingly, no principal payment on the Class A-2 Notes was required.
The legal final maturity of the Class A-2 Notes is in September 2044, but it is anticipated that, unless earlier prepaid to the
extent permitted under the Indenture, the Class A-2 Notes will be repaid in September 2021 (the “Class A-2 Anticipated
Repayment Date”). If the Co-Issuers have not repaid or refinanced the Class A-2 Notes prior to the Class A-2 Anticipated
Repayment Date, additional interest will accrue on the Class A-2 Notes equal to the greater of (i) 5.00% per annum and (ii) a
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 Company did not draw on the Variable Funding Notes during 2014. As of December 31, 2014 there were no amounts
outstanding under the Revolving Facility; however, available borrowing capacity under the Variable Funding Notes was
reduced by $9.6 million of letters of credit outstanding as of December 31, 2014.