Wendy's 2013 Annual Report Download - page 52

credit and allows for liens in the form of cash collateralized letters of credit up to an additional $40.0 million. The
obligations under the Restated Credit Agreement are secured by substantially all of the non-real estate assets and stock
of Wendy’s and its domestic subsidiaries (other than certain unrestricted subsidiaries) and 65% of the stock of certain
of its foreign subsidiaries in each case subject to certain limitations and exceptions.
On September 24, 2013, Wendy’s entered into the Amendment to its Restated Credit Agreement to borrow
Incremental Term Loans. The Amendment does not contain any material changes to existing covenants or other
terms of the Restated Credit Agreement, except as described in the preceding sentence. On October 24, 2013,
Wendy’s borrowed $225.0 million of Incremental Term Loans under the Amendment.
The Term B Loans, Term A Loans, and Incremental Term Loans (collectively, the “Term Loans”) are payable
in quarterly installments which commenced on December 31, 2012, September 30, 2013 and December 31, 2013,
respectively, with the remaining balances payable upon maturity. In addition, the Term Loans require prepayments of
principal amounts resulting from certain events and excess cash flow on an annual basis from Wendy’s as defined
under the Restated Credit Agreement. An excess cash flow payment was not required for fiscal 2013 or 2012. An
unused commitment fee of 50 basis points per annum is payable quarterly on the average unused amount of the
revolving credit facility until the maturity date. During the third quarter of 2013, Wendy’s transitioned the security
for all of its outstanding letters of credit from the revolving credit facility to cash collateral. Therefore, as of
December 29, 2013, there were no amounts outstanding under the revolving credit facility. As of December 29,
2013, the Company had outstanding cash collateralized letters of credit with various parties of $18.6 million. The
interest rates on Term A Loans and Term B Loans were 2.42% and 3.25%, respectively, as of December 29, 2013.
During the year ended December 29, 2013, Wendy’s incurred $8.0 million in costs related to the Restated
Credit Agreement and the Amendment, which are being amortized to “Interest expense” through the maturity of the
Term Loans utilizing the effective interest rate method. Proceeds from the Incremental Term Loans, plus cash on
hand, were used to redeem all amounts outstanding on the aggregate principal amount of the 6.20% Senior Notes at
a price equal to 103.8%, as defined in the 6.20% Senior Notes and accrued and unpaid interest to the redemption
date. In connection with the redemption of the 6.20% Senior Notes, Wendy’s terminated the related interest rate
swaps with notional amounts totaling $225.0 million which had been designated as fair value hedges. See Note 11 of
the Financial Statements and Supplementary Data contained in Item 8 herein for more information on the interest
rate swaps. As a result, Wendy’s recognized a loss on the early extinguishment of debt of $7.5 million during the
fourth quarter of 2013.
During the year ended December 30, 2012, proceeds from the Term B Loans were used (1) to repay all
amounts outstanding under the 2010 Term Loan, (2) to redeem the Wendy’s Restaurants 10.00% Senior Notes due
2016 (the “Senior Notes”) in the amounts of $440.8 million aggregate principal at a redemption price of 107.5% of
the principal amount in July 2012 and to purchase $124.2 million aggregate principal at a purchase price of
108.125% of the principal amount in May 2012, both plus accrued and unpaid interest and (3) to pay substantially
all of the Credit Agreement fees and expenses. As a result, Wendy’s incurred a loss on the early extinguishment of
debt of $75.1 million during the year ended December 30, 2012.
The affirmative and negative covenants in the Restated Credit Agreement include, among others, preservation
of corporate existence; payment of taxes; maintenance of insurance; and limitations on: indebtedness (including
guarantee obligations of other indebtedness); liens; mergers, consolidations, liquidations and dissolutions; sales of
assets; dividends and other payments in respect of capital stock; investments; payments of certain indebtedness;
transactions with affiliates; changes in fiscal year; negative pledge clauses and clauses restricting subsidiary
distributions; and material changes in lines of business. The financial covenants contained in the Restated Credit
Agreement are (1) a consolidated interest coverage ratio and (2) a consolidated senior secured leverage ratio. Wendy’s
was in compliance with the covenants of the Restated Credit Agreement as of December 29, 2013. The covenants
generally do not restrict The Wendy’s Company or any of its subsidiaries that are not subsidiaries of Wendy’s.
48