Wendy's 2010 Annual Report Download - page 64

Except as described below, there were no material changes to the terms of any debt obligations since January 3,
2010. See Note 11 of the Financial Statements and Supplementary Data contained in Item 8 of this document for
more information related to our long-term debt obligations.
Credit Agreement
On May 24, 2010, Wendy’s/Arby’s Restaurants entered into a $650.0 million Credit Agreement (the “Credit
Agreement”), which includes a $500.0 million senior secured term loan facility (the “Term Loan”) and a
$150.0 million senior secured revolving credit facility (the “Credit Facility”). The Credit Agreement contains
provisions for an uncommitted increase of up to $300.0 million principal amount in the aggregate in the Credit
Facility and/or Term Loan subject to the satisfaction of certain conditions. The Credit Facility includes a sub-facility
for the issuance of up to $70.0 million of letters of credit. The obligations under the Credit Agreement are secured by
substantially all of the non-real estate assets of Wendy’s/Arby’s Restaurants and its domestic subsidiaries (other than
certain unrestricted subsidiaries), the stock of its domestic subsidiaries (other than certain unrestricted subsidiaries),
65% of the stock of certain of its foreign subsidiaries, as well as by mortgages on certain restaurant properties.
The Term Loan was issued at 99.5% of the principal amount, which represented an original issue discount of
0.5% and resulted in net proceeds paid to us of $497.5 million. The $2.5 million discount is being accreted and the
related charge included in interest expense through the maturity of the Term Loan. The Term Loan will mature on
May 24, 2017 and requires quarterly principal installments which commenced on September 30, 2010 equal to
1% per annum of the initial principal amount outstanding, with the balance payable on the maturity date.
Should our strategic alternatives for Arby’s result in a sale of the brand, we may be required to utilize a portion
of the sale proceeds to reduce the Term Loan.
The Credit Facility expires not later than May 24, 2015. An unused commitment fee of 50 basis points per
annum is payable quarterly on the average unused amount of the Credit Facility until the maturity date.
The interest rate on the Term Loan is based on (i) the Eurodollar Rate as defined in the Credit Agreement (but
not less than 1.50%), plus 3.50%, or a Base Rate, as defined in the Credit Agreement (but not less than 2.50%), plus
2.50%. Since the inception of the Term Loan, we have elected to use the Eurodollar Rate, which resulted in an
interest rate on the Term Loan of 5.00% as of January 2, 2011.
The Companies incurred approximately $16.4 million in costs related to the Credit Agreement, which is being
amortized to interest expense over the Term Loan’s term utilizing the effective interest rate method.
Proceeds from the Term Loan were used to (1) repay approximately $253.8 million of existing indebtedness,
including fees and interest, under the then existing Wendy’s/Arby’s Restaurants amended senior secured term loan
which replaced the prior Arby’s credit agreement in March 2009 and which was scheduled to be due in 2012,
(2) redeem the Wendy’s 6.25% senior notes scheduled to be due in 2011, and (3) pay fees and expenses related to the
Credit Agreement. The remaining Term Loan proceeds were used for working capital and other general corporate
purposes.
The Companies recognized a loss on early extinguishment of debt of $26.2 million in the second quarter of
2010 related to the repayment of debt from the proceeds of the Term Loan. This loss consisted of (1) a $15.0 million
premium payment required to redeem the Wendy’s 6.25% senior notes, (2) $5.5 million for the write-off of the
unaccreted discount of the Wendy’s 6.25% senior notes (recorded in connection with the Wendy’s Merger), and
(3) $5.7 million for the write-off of deferred costs associated with the repayment of the prior senior secured term loan.
Debt Covenants
The affirmative and negative covenants in the Credit Agreement include, among others, preservation of
corporate existence; payment of taxes; and maintenance of insurance; and limitations on: indebtedness (including
guarantee obligations of other indebtedness); liens; mergers, consolidations, liquidations and dissolutions; sales of
assets; dividends and other payments in respect of capital stock; investments; payments of certain indebtedness;
transactions with affiliates; changes in fiscal year; negative pledge clauses and clauses restricting subsidiary
distributions; and material changes in lines of business. The financial covenants contained in the Credit Agreement
are (i) a consolidated interest coverage ratio, (ii) a consolidated senior secured leverage ratio, and (iii) a consolidated
senior secured lease adjusted leverage ratio. The covenants generally do not restrict Wendy’s/Arby’s or any of its
58