WeightWatchers 2005 Annual Report Download - page 97

WEIGHT WATCHERS INTERNATIONAL, INC. AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS (Continued)
(IN THOUSANDS, EXCEPT PER SHARE AMOUNTS)
an aggregate principal amount of $170,000 (the ‘‘First Lien Term Credit Facility’’) and (ii) a five and
one-half year, senior secured second lien term loan facility in an aggregate principal amount of $45,000
(the ‘‘Second Lien Term Credit Facility’’). The WW.com Credit Facilities are governed by two credit
agreements among WW.com, Credit Suisse, as administrative agent and collateral agent, and the
lenders party thereto (collectively, the ‘‘Lenders’’). Each of WW.com’s existing and future domestic
subsidiaries have guaranteed the Credit Facilities and the WW.com Credit Facilities are secured by
substantially all the assets of WW.com and these subsidiaries. WWI has not guaranteed the WW.com
Credit Facilities.
The First Lien Term Credit Facility bears an interest rate equal to LIBOR plus 2.25% per annum,
or, at WW.com’s option, the alternate base rate, as defined, plus 1.25% per annum. The Second Lien
Term Credit Facility bears an interest rate equal to LIBOR plus 4.75% per annum or, at WW.com’s
option, the alternate base rate, as defined, plus 3.75% per annum.
Loans outstanding under the WW.com Credit Facilities (i) must be prepaid with certain
percentages of excess cash flow and net cash proceeds of asset sales, issuances, offerings or placements
of debt obligations of WW.com and issuances of equity securities of WW.com; and (ii) may be
voluntarily prepaid at any time in whole or in part without premium or penalty, with certain exceptions
depending upon the date of payment. The rights and priorities of the Lenders under the WW.com
Credit Facilities are governed by an intercreditor agreement.
The WW.com Credit Facilities contain customary covenants, including affirmative and negative
covenants that, in certain circumstances, restrict WW.com’s ability to incur additional indebtedness, pay
dividends on and redeem capital stock, make other restricted payments, including investments, sell
WW.com assets and enter into consolidations, mergers and transfer of all or substantially all of
WW.com’s assets. The WW.com Credit Facilities also require WW.com to maintain specified financial
ratios and satisfy financial condition tests, which become move restrictive over time. The WW.com
Credit Facilities contain customary events of default. Upon the occurrence of an event of default under
the WW.com Credit Facilities, amounts outstanding may be immediately due and payable.
On November 4, 2005, Standard & Poor’s assigned its ‘‘B+’’ corporate credit rating to
WeightWatchers.com. In addition, Standard & Poor’s assigned ratings of ‘‘B+’’ to the First Lien Term
Credit Facility and ‘‘B-’’ to the Second Lien Term Credit Facility. On November 2, 2005, Moody’s
assigned ratings of ‘‘Ba3’’ to the First Lien Term Credit Facility and ‘‘B1’’ to the Second Lien Term
Credit Facility.
Senior Subordinated Notes
As part of the Recapitalization, WWI issued $150,000 USD denominated and A100,000 euro
denominated principal amount of 13% Senior Subordinated Notes due 2009 (the ‘‘Notes’’) to qualified
institutional buyers.
In fiscal 2003, WWI successfully completed a tender offer and consent solicitation to purchase
96.6% of its $150,000 USD denominated ($144,900) and 91.6% of its A100,000 euro denominated
(A91,600) Notes. The consideration for the tender offer and consent solicitation was funded from cash
from operations of $57,292 and additional borrowings under the Credit Facility of $227,326 (as
described above). On October 1, 2004, WWI repurchased and retired the remaining balance of its
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