Dunkin' Donuts 2013 Annual Report Download - page 81

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Senior credit facility
The Company’s senior credit facility consists of $1.90 billion aggregate principal amount term loans and a $100.0 million
revolving credit facility, which were entered into by DBGI’s subsidiary, Dunkin’ Brands, Inc. (“DBI”) in November 2010. The
term loans and revolving credit facility mature in February 2020 and February 2018, respectively. As of December 28, 2013
and December 29, 2012, $1.83 billion and $1.86 billion, respectively, of principal was outstanding on the term loans. As of
December 28, 2013 and December 29, 2012, $3.0 million and $11.5 million, respectively, of letters of credit were outstanding
against the revolving credit facility. There were no amounts drawn down on these letters of credit.
Borrowings under the term loans bear interest at a rate per annum equal to an applicable margin plus, at our option, either (1) a
base rate determined by reference to the highest of (a) the Federal Funds rate plus 0.5%, (b) the prime rate, (c) the LIBOR rate
plus 1.0%, and (d) 2.0% or (2) a LIBOR rate provided that LIBOR shall not be lower than 1.0% (the “LIBOR floor”). The
applicable margin under the term loan facility is 1.75% for loans based upon the base rate and 2.75% for loans based upon the
LIBOR rate. The effective interest rate for term loans, including the amortization of original issue discount and deferred
financing costs, was 4.0% at December 28, 2013.
Borrowings under the revolving credit facility bear interest at a rate per annum equal to an applicable margin plus, at our
option, either (1) a base rate determined by reference to the highest of (a) the Federal Funds rate plus 0.5%, (b) the prime rate,
and (c) the LIBOR rate plus 1.0%, or (2) a LIBOR rate. The applicable margin under the revolving credit facility is 1.5% for
loans based upon the base rate and 2.5% for loans based upon the LIBOR rate. In addition, we are required to pay a 0.5%
commitment fee per annum on the unused portion of the revolver and a fee for letter of credit amounts outstanding of 2.5%.
Repayments are required to be made under the term loans equal to $19.0 million per calendar year, payable in quarterly
installments through December 2019, with the remaining principal balance due in February 2020. Additionally, following the
end of each fiscal year, the Company is required to prepay an amount equal to 25% of excess cash flow (as defined in the senior
credit facility) for such fiscal year. If DBI’s leverage ratio, which is a measure of DBI’s outstanding debt to earnings before
interest, taxes, depreciation, and amortization, adjusted for certain items (as specified in the senior credit facility), is less than
4.75x, no excess cash flow payments are required. If DBI’s leverage ratio is greater than 5.50x, the Company is required to
prepay an amount equal to 50% of excess cash flow. The excess cash flow payments may be applied to required principal
payments. During fiscal year 2013, the Company made total principal payments of $24.2 million, including an excess cash flow
payment in the first quarter of 2013 of $4.2 million based on 2012 excess cash flow and leverage ratio requirements. Based on
all payments made, including the required excess cash flow payment in the first quarter of 2013, no additional principal
payments would be required in the next twelve months as of December 28, 2013, though the Company may elect to make
voluntary payments. The Company has reflected a $5.0 million voluntary payment, which was paid during the first week of
fiscal year 2014, within the current portion of long-term debt as of December 28, 2013. Other events and transactions, such as
certain asset sales and incurrence of debt, may trigger additional mandatory prepayments.
The senior credit facility contains certain financial and nonfinancial covenants, which include restrictions on liens, investments,
additional indebtedness, asset sales, certain dividend payments, and certain transactions with affiliates. At December 28, 2013
and December 29, 2012, the Company was in compliance with all of its covenants under the senior credit facility.
Certain of the Company’s wholly owned domestic subsidiaries guarantee the senior credit facility. All obligations under the
senior credit facility, and the guarantees of those obligations, are secured, subject to certain exceptions, by substantially all
assets of DBI and the subsidiary guarantors.
During 2011, the Company increased the size of the term loans from $1.25 billion to $1.50 billion. The incremental proceeds of
the term loans were used to repay $250.0 million of the Company’s senior notes. Additionally, the Company completed two
separate re-pricing transactions to reduce the stated interest rate on the senior credit facility. As a result of the additional term
loan borrowings and the re-pricings of the term loans, the Company recorded a loss on debt extinguishment and refinancing
transactions of $8.2 million in fiscal year 2011, which includes debt extinguishment of $477 thousand related to the write-off of
original issuance discount and deferred financing costs, and $7.7 million of costs paid to creditors and third parties.
In August 2012, DBI amended its senior credit facility to provide for additional term loan borrowings of $400.0 million. The
additional borrowings were issued with an original issue discount of $4.0 million, resulting in net cash proceeds of $396.0
million. The proceeds were used to fund a repurchase of common stock from certain shareholders (see note 13(c)). In addition,
the amendment provides certain changes to the negative covenants contained in the senior credit facility and permits increases
in future incremental facilities subject to the Company and DBI remaining in compliance with certain specified leverage ratios.
In connection with the amendment, the Company recorded costs of $4.0 million, which consisted primarily of fees paid to third
parties, within loss on debt extinguishment and refinancing transactions in the consolidated statements of operations.
In February 2013, the Company amended its senior credit facility, resulting in a reduction of the interest rates and an extension
of the maturity dates for both the term loans and the revolving credit facility. In connection with the amendment, certain