Wendy's 2010 Annual Report Download - page 65

subsidiaries that are not subsidiaries of Wendy’s/Arby’s Restaurants. Wendy’s/Arby’s Restaurants was in compliance
with all covenants of the Credit Agreement as of January 2, 2011 and we expect to remain in compliance with all of
these covenants for the next 12 months.
The indentures that govern Wendy’s 6.20% senior notes and 7% debentures contain covenants that specify
limits on the incurrence of indebtedness secured by liens and sale-leaseback transactions. We were in compliance with
these covenants as of January 2, 2011 and we expect to remain in compliance with these covenants for the next
12 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 operating leases, require or required periodic financial reporting of certain
subsidiary entities within Arby’s or of individual restaurants, which in many cases have not been prepared or reported.
The Companies have negotiated waivers and alternative covenants with their most significant lessors which substitute
consolidated financial reporting of Arby’s 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 2, 2011, we were not in
compliance, and remain 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 we
are in default of any of those lease agreements. We do not believe that such non-compliance will have a material
adverse effect on our consolidated financial position or results of operations.
Derivatives
In connection with the redemption of the Wendy’s 6.25% senior notes discussed above under “Credit
Agreement,” we cancelled four interest rate swaps with notional amounts totaling $175.0 million that had swapped
the fixed rate interest rates on these senior notes for floating rates. We recognized a gain on the cancellation of
$1.9 million in the second quarter of 2010, which is included in “Interest expense.”
Other Revolving Credit Facilities
In December 2009, and as amended in February and August 2010, AFA entered into a revolving loan
agreement with Arby’s. The terms of this agreement allow AFA to have revolving loans of up to $14.0 million
outstanding with an expiration date of March 2012 and bearing interest at 7.5% per annum. In February 2011, the
maximum principal amount was reduced to $11.0 million. As of January 2, 2011, the outstanding revolving loan
balance was $4.5 million.
Convertible Notes
(Wendy’s/Arby’s)
On June 17, 2010, Wendy’s/Arby’s repurchased the remaining 5% convertible notes for $2.1 million,
including accrued interest. The convertible notes were repurchased at a price of 100% of their principal amount plus
accrued interest.
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