Sonic 2013 Annual Report Download - page 44

42
At August 31, 2013, future maturities of long-term debt were $10.0 million for fiscal year 2014, $9.8 million
annually for fiscal years 2015, 2016 and 2017, and $253.0 million for fiscal year 2018.
On May 20, 2011, various subsidiaries of the Company (the “Co-Issuers”) issued $500 million of Series 2011-1
Senior Secured Fixed Rate Notes, Class A-2 (the “2011 Fixed Rate Notes”) in a private transaction which bears
interest at 5.4% per annum. The 2011 Fixed Rate Notes have an expected life of seven years with an anticipated
repayment date in May 2018. The Co-Issuers also entered into a securitized financing facility of Series 2011-1
Senior Secured Variable Funding Notes, Class A-1 (the "2011 Variable Funding Notes"). This revolving credit facility
allows for the issuance of up to $100 million of 2011 Variable Funding Notes and certain other credit instruments,
including letters of credit. Interest on the 2011 Variable Funding Notes is based on the one-month London Interbank
Offered Rate (“LIBOR”) or Commercial Paper (“CP”), depending on the funding source, plus the base spread
mentioned below, per annum. There is a 0.5% annual commitment fee payable monthly on the unused portion of
the 2011 Variable Funding Notes facility.
Sonic used the $535 million of net proceeds from the issuance of the 2011 Fixed Rate Notes and 2011 Variable
Funding Notes (collectively, the “2011 Notes”) to repay its existing Series 2006-1 Senior Secured Variable Funding
Notes, Class A-1 (the “2006 Variable Funding Notes”) and Series 2006-1 Senior Secured Fixed Rate Notes, Class
A-2 (the “2006 Fixed Rate Notes” and, together with the 2006 Variable Funding Notes, the“2006 Notes”) in full
and to pay the costs associated with the securitized financing transaction, including the existing noteholder and
insurer make-whole premiums. Loan origination costs associated with the Company’s 2011 refinancing totaled
$16.4 million and were allocated between the 2011 Notes.
In connection with the 2011 transaction described above, the Company recognized a $28.2 million loss from
the early extinguishment of debt during the third quarter of fiscal year 2011, which primarily consisted of a $25.3
million prepayment premium and the write-off of unamortized deferred loan fees remaining from the refinanced debt.
In addition, the Company’s deferred hedging loss was reclassified from accumulated other comprehensive income
into earnings during the third quarter of fiscal year 2011. Prior to the 2011 refinancing, during the second quarter
of fiscal year 2011, the Company repurchased $62.5 million of its 2006 Variable Funding Notes in a privately
negotiated transaction. The Company recognized a gain of $5.2 million on the extinguishment of the notes during
the second fiscal quarter of 2011. These transactions are reflected within “Net loss from early extinguishment of
debt” in the accompanying Consolidated Statements of Income and Comprehensive Income.
In the second quarter of fiscal year 2013, the Co-Issuers made a debt prepayment, at par, of $20.0 million on
the 2011 Fixed Rate Notes. In the fourth quarter of fiscal year 2013, the Co-Issuers refinanced and paid $155
million of the 2011 Fixed Rate Notes with the issuance of $155 million of Series 2013-1 Senior Secured Fixed Rate
Notes, Class A-2 (the “2013 Fixed Rate Notes”) in a private transaction which bears interest at 3.75% per annum.
The 2013 Fixed Rate Notes have an expected life of seven years, interest payable monthly, with no scheduled
principal amortization. Additionally, the Co-Issuers extended the 2011 Variable Funding Note’s renewal date by two
years to May 21, 2018 and decreased the base spread from 3.75% to 3.50% in the fourth quarter of fiscal year 2013.
At August 31, 2013, the balance outstanding under the 2011 Fixed Rate Notes and 2013 Fixed Rate Notes,
including accrued interest, was $292.4 million and $155.2 million, respectively and there was no outstanding
balance under the 2011 Variable Funding Notes. As of August 31, 2012, the balance outstanding under the 2011
Fixed Rate Notes totaled $482.0 million, including accrued interest. The weighted-average interest cost of the 2011
Fixed Rate Notes and 2013 Fixed Rate Notes was 5.9% and 4.1%, respectively. The weighted-average interest
cost includes the effect of the loan origination costs.
In fiscal year 2013, the debt prepayment and the partial debt refinancing resulted in a pro-rata write-off of loan
origination costs from the 2011 Fixed Rate Notes representing a majority of the $4.4 million loss which is reflected
in “Net loss from early extinguishment of debt” on the Consolidated Statements of Income and Comprehensive
Income. An additional $4.1 million in debt origination costs were capitalized in conjunction with the 2013 Fixed
Rate Notes. Loan costs are being amortized over each note’s expected life. The amount of loan costs expected
to be amortized over the next 12 months is reflected in “Other current assets” on the Consolidated Balance Sheets.
While the 2011 Notes and the 2013 Fixed Rate Notes are structured to provide for seven-year lives, from their
original issuance date, respectively, they have a legal final maturity date of May 2041. The Company intends to
repay or refinance the 2011 Notes and the 2013 Fixed Rate Notes on or before the end of their expected lives. In
the event the 2011 Notes and the 2013 Fixed Rate Notes are not paid in full by the end of their expected lives, the
Notes to Consolidated Financial Statements
August 31, 2013, 2012 and 2011 (In thousands, except per share data)