Sonic 2015 Annual Report Download - page 39

10. Debt
Long-term debt consists of the following at August 31:
2015 2014
Class A-2 2013-1 senior secured fixed rate notes $ 155,000 $ 155,000
Class A-2 2011-1 senior secured fixed rate notes 272,488 282,238
Class A-1 2011-1 senior secured variable funding notes 10,500 –
Other 40 80
438,028 437,318
Less long-term debt due within one year (9,790) (9,791)
Long-term debt due after one year $ 428,238 $ 427,527
At August 31, 2015, future maturities of long-term debt were $9.8 million for fiscal year 2016, $9.7 million for fiscal year
2017, $263.5 million for fiscal year 2018, no maturities for fiscal year 2019 and $155.0 million for fiscal year 2020.
On May 20, 2011, in a private transaction, 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”), which bear 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” and, together with the 2011 Fixed Rate Notes, the “2011 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.
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, in a private transaction 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”), which bear interest at 3.75% per annum. The 2013 Fixed Rate Notes have an
expected life of seven years, interest payable monthly, no scheduled principal amortization and an anticipated repayment
date in July 2020. Additionally, the Co-Issuers extended the 2011 Variable Funding Notes’ renewal date by two years to May
2018 and decreased the base spread from 3.75% to 3.50% in the fourth quarter of fiscal year 2013.
As of August 31, 2015, the weighted-average interest cost of the 2011 Fixed Rate Notes, 2011 Variable Funding Notes
and 2013 Fixed Rate Notes was 5.9%, 4.1% 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. An additional $4.1 million in debt origination costs was
capitalized in conjunction with the 2013 Fixed Rate Notes. Loan costs are being amortized over each note’s expected life.
While the 2011 Notes and the 2013 Fixed Rate Notes are structured to provide for seven-year lives from their original
issuance dates, they have legal final maturity dates of May 2041 and July 2043, respectively. 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. If the Company
prepays the debt prior to the anticipated repayment date the Company may be required to pay a prepayment penalty under
certain circumstances. In the event the 2011 Notes and the 2013 Fixed Rate Notes are not paid in full by the end of their
expected lives, they are subject to an upward adjustment in the interest rate of at least 5% per annum. In addition, principal
payments will accelerate by applying all of the royalties, lease revenues and other fees securing the debt, after deducting
certain expenses, until the debt is paid in full. Also, any unfunded amount under the 2011 Variable Funding Notes will
become unavailable.
Notes to Consolidated Financial Statements
August 31, 2015, 2014 and 2013 (In thousands, except per share data)
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