Wendy's 2009 Annual Report Download - page 59

are due through April 4, 2011 and bear interest at 7.5%. As of January 3, 2010, the outstanding balance under
this agreement was $5.1 million.
Derivatives
During the third quarter of 2009, we entered into several interest rate swap agreements (the “Interest
Rate Swaps”) with notional amounts totaling $361.0 million that swap the fixed rate interest rates on our
6.20% and 6.25% Wendy’s Senior Notes for floating rates. The Company’s primary objective for entering into
derivative instruments is to manage its exposure to changes in interest rates, as well as to maintain an
appropriate mix of fixed and variable rate debt. The Interest Rate Swaps are accounted for as fair value hedges
and qualify for the short-cut method under the applicable guidance. At January 3, 2010, the fair value of our
Interest Rate Swaps was $1.6 million and has been included in “Deferred costs and other assets” and as an
adjustment to the carrying amount of the 6.20% and 6.25% Wendy’s Senior Notes.
Debt Covenants
The Credit Agreement also contains financial covenants that, among other things, require Wendy’s and
ARG and their subsidiaries to maintain certain aggregate maximum leverage and minimum interest coverage
ratios and restrict their ability to incur debt, pay dividends or make other distributions to Wendy’s/Arby’s,
make certain capital expenditures, enter into certain fundamental transactions (including sales of assets and
certain mergers and consolidations) and create or permit liens. We were in compliance with all the covenants of
the Credit Agreement as of January 3, 2010 and we expect to remain in compliance with all of these covenants
for the next twelve months. As of January 3, 2010, there was $306.5 million available for the payment of
dividends indirectly to Wendy’s/Arby’s under the covenants of the Credit Agreement which includes the net
proceeds, as defined, from the Senior Notes less any dividends paid since their issuance.
The indentures that govern Wendy’s 6.20% and 6.25% Senior Notes and 7% Debentures (the “Wendy’s
Notes”) contain covenants that specify limits on the incurrence of indebtedness. We were in compliance with
these covenants as of January 3, 2010 and project that we will be in compliance with these covenants for the
next twelve months.
A significant number of the underlying leases in the Arby’s restaurants segment for sale-leaseback
obligations and capitalized lease obligations, as well as the operating leases, require or required periodic
financial reporting of certain subsidiary entities within ARG or of individual restaurants, which in many cases
have not been prepared or reported. The Company has negotiated waivers and alternative covenants with its
most significant lessors which substitute consolidated financial reporting of ARG for that of individual
subsidiary entities and which modify restaurant level reporting requirements for more than half of the affected
leases. Nevertheless, as of January 3, 2010, the Company was not in compliance, and remains not in
compliance, with the reporting requirements under those leases for which waivers and alternative financial
reporting covenants have not been negotiated. However, none of the lessors has asserted that the Company is in
default of any of those lease agreements. The Company does not believe that such non-compliance will have a
material adverse effect on its consolidated financial position or results of operations.
Credit Ratings
Wendy’s/Arby’s Group, Inc. and its subsidiaries with specific debt issuances (Wendy’s/Arby’s Restaurants
and Wendy’s) are rated by Standard & Poor’s (“S&P”) and Moody’s Investors Service (“Moody’s”).
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