Dunkin' Donuts 2013 Annual Report Download - page 82

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-72-
lenders, holding $214.3 million of term loans, exited the term loan lending syndicate. The principal of the exiting lenders was
replaced with additional loans from both existing and new lenders. As a result, during the first quarter of 2013, the Company
recorded a loss on debt extinguishment and refinancing transactions of $5.0 million, including $3.9 million related to the write-
off of original issuance discount and deferred financing costs and $1.1 million of fees paid to third parties. The amended term
loans were issued with an original issue discount of 0.25%, or $4.6 million, which was recorded as a reduction to long-term
debt.
Cumulative debt issuance costs incurred and capitalized in relation to the senior credit facility were $35.0 million, including
costs incurred and capitalized in connection with all refinancing transactions. The term loans, including additional term loan
borrowings, were issued with an original issue discount of $14.9 million. Total amortization of original issue discount and debt
issuance costs related to the senior credit facility was $4.7 million, $5.7 million, and $5.3 million for fiscal years 2013, 2012,
and 2011, respectively, which is included in interest expense in the consolidated statements of operations.
In February 2014, the Company amended its senior credit facility, which now consists of $1.38 billion in term loans due
February 2021 (“2021 Term Loans”), $450 million in term loans due September 2017 (“2017 Term Loans”), and a $100 million
revolving credit facility due February 2019. The interest rate on the 2021 Term Loans is LIBOR plus 2.50% with a LIBOR
floor of 0.75%, while the interest rate on the 2017 Term Loans is LIBOR plus 2.50% with no LIBOR floor. The new interest
rate for the revolving credit facility is LIBOR plus 2.25% with no LIBOR floor. The total principal as of the date of the
amendment and all other material provisions, including covenants under the existing senior credit facility, remain unchanged.
Senior notes
DBI issued $625.0 million face amount senior notes in November 2010 with a maturity of December 2018 and interest payable
semi-annually at a rate of 9.625% per annum.
The senior notes were issued with an original issue discount of $9.4 million. Total debt issuance costs incurred and capitalized
in relation to the senior notes were $15.6 million. Total amortization of original issue discount and debt issuance costs related to
the senior notes was $1.0 million for fiscal year 2011, which is included in interest expense in the consolidated statements of
operations.
In conjunction with the additional term loan borrowings during 2011, the Company repaid $250.0 million of senior notes.
Using funds raised by the Company’s initial public offering (see note 13(a)) in August 2011, the Company repaid the full
remaining principal balance on the senior notes. In conjunction with the repayment of senior notes, the Company recorded a
loss on debt extinguishment of $26.0 million, which includes the write-off of original issuance discount and deferred financing
costs totaling $22.8 million, as well as prepayment premiums and third-party costs of $3.2 million.
Maturities of long-term debt
The Company intends to make quarterly principal payments of $5.0 million. However, considering the February 2014
amendment to the senior credit facility and voluntary prepayments made, the aggregate contractual maturities of long-term debt
for 2014 through 2018 are as follows (in thousands):
2017 Term
Loans
2021 Term
Loans Total
2014 $ 3,375 — 3,375
2015 4,500 10,342 14,842
2016 4,500 13,789 18,289
2017 437,625 13,789 451,414
2018 — 13,789 13,789
(9) Derivative instruments and hedging transactions
The Company is exposed to global market risks, including the effect of changes in interest rates, and may use derivative
instruments to mitigate the impact of these changes. The Company does not use derivatives with a level of complexity or with a
risk higher than the exposures to be hedged and does not hold or issue derivatives for trading purposes. The Company's hedging
instruments consist solely of interest rate swaps at December 28, 2013. The Company's risk management objective and strategy
with respect to the interest rate swaps is to limit the Company's exposure to increased interest rates on its variable rate debt by
reducing the potential variability in cash flow requirements relating to interest payments on a portion of its outstanding debt.
The Company documents its risk management objective and strategy for undertaking hedging transactions, as well as all
relationships between hedging instruments and hedged items.