Wendy's 2013 Annual Report Download - page 93

THE WENDY’S COMPANY AND SUBSIDIARIES
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS—CONTINUED
(In Thousands Except Per Share Amounts)
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 $18,593. 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 $7,961 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 Wendy’s
6.20% Senior Notes due in 2014 (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
$225,000 which had been designated as fair value hedges. See Note 11 for more information on the interest rate
swaps. As a result, Wendy’s recognized a loss on the early extinguishment of debt of $7,544 during the fourth
quarter of 2013 which consisted of (1) a premium payment, as defined in the 6.20% Senior Notes, (2) the
remaining fair value adjustment previously recorded in connection with the Wendy’s merger, partially offset by
(3) a benefit from the cumulative effect of our fair value hedges, as illustrated in the table below.
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 $440,775 aggregate principal at a redemption price of 107.5% of the
principal amount in July 2012 and to purchase $124,225 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 of the refinancings described above, the Company incurred losses on the early extinguishment of debt
as follows:
Year Ended
2013
Year Ended
2012
Unaccreted discount on Term B Loans ................................ $ 9,561 $ —
Deferred costs associated with the Credit Agreement ...................... 11,458 —
Unaccreted fair value adjustment associated with the 6.20% Senior Notes ..... 3,168 —
Benefit from cumulative effect of the fair value hedges .................... (4,063) —
Premium payment to redeem/purchase the 6.20% Senior Notes and the Senior
Notes, respectively .............................................. 8,439 43,151
Unaccreted discount on the Senior Notes .............................. — 9,272
Deferred costs associated with the Senior Notes.......................... — 12,433
Unaccreted discount on the 2010 Term Loan ........................... — 1,695
Deferred costs associated with the 2010 Term Loan ...................... — 8,525
Loss on early extinguishment of debt .............................. $28,563 $75,076
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.
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