Wendy's 2014 Annual Report Download - page 24

facility (“Term A Loans”), a partial refinancing of our existing term loan resulting in a $769.4 million senior secured
term loan facility (“Term B Loans”) and a $200.0 million senior secured revolving credit facility. The Restated Credit
Agreement also contains provisions for an uncommitted increase of up to $275.0 million principal amount of the
Term B Loans subject to the satisfaction of certain conditions. The revolving credit facility includes a sub-facility for
the issuance of up to $70.0 million of letters of credit and allows for liens in the form of cash collateralized letters of
credit up to an additional $40.0 million. During 2013, Wendy’s transitioned the security for all of its outstanding
letters of credit from the revolving credit facility to cash collateral. Therefore, as of December 28, 2014 and
December 29, 2013, there were no amounts outstanding under the revolving credit facility.
On September 24, 2013, Wendy’s entered into an amendment (the “Amendment”) to its Restated Credit
Agreement to borrow an aggregate principal amount up to $225.0 million of additional Term A Loans (“Incremental
Term Loans”). On October 24, 2013, Wendy’s borrowed $225.0 million of Incremental Term Loans under the
Amendment.
The obligations under the Restated Credit Agreement are secured by substantially all of the non-real estate
assets and stock of Wendy’s and its domestic subsidiaries (other than certain unrestricted subsidiaries) and 65% of the
stock of certain of its foreign subsidiaries, in each case subject to certain limitations and exceptions. The affirmative
and negative covenants in the Restated Credit Agreement include, among others, preservation of corporate existence;
payment of taxes; 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 Restated Credit Agreement are (i) a consolidated interest
coverage ratio, and (ii) a consolidated senior secured leverage ratio. For purposes of these covenants, “consolidated”
means the combined results of Wendy’s and its subsidiaries (other than unrestricted subsidiaries). The covenants
generally do not restrict The Wendy’s Company or any of its subsidiaries that are not subsidiaries of Wendy’s. If
Wendy’s and its subsidiaries are unable to generate sufficient cash flow or otherwise obtain the funds necessary to
make required payments of interest or principal under, or are unable to comply with covenants of, the Restated Credit
Agreement, then Wendy’s would be in default under the terms of the agreement, which would preclude the payment
of dividends to The Wendy’s Company, restrict access to the revolving credit facility, and, under certain
circumstances, permit the lenders to accelerate the maturity of the indebtedness. See Note 10 of the Financial
Statements and Supplementary Data included in Item 8 herein, for further information regarding the Restated Credit
Agreement.
Wendy’s has a significant amount of debt outstanding. Such indebtedness, along with the other contractual
commitments of our subsidiaries, could adversely affect our business, financial condition and results of
operations, as well as the ability of certain of our subsidiaries to meet debt payment obligations.
Wendy’s has a significant amount of debt and debt service requirements. As of December 28, 2014, on a
consolidated basis, there was approximately $1.4 billion of outstanding debt.
This level of debt could have significant consequences on our future operations, including:
• making it more difficult to meet payment and other obligations under outstanding debt;
• resulting in an event of default if our subsidiaries fail to comply with the financial and other restrictive
covenants contained in debt agreements, which event of default could result in all of our subsidiaries’ debt
becoming immediately due and payable;
• reducing the availability of our cash flow to fund working capital, capital expenditures, acquisitions and other
general corporate purposes, and limiting our ability to obtain additional financing for these purposes;
• subjecting us to the risk of increased sensitivity to interest rate increases on our indebtedness with variable
interest rates, including borrowings under the Restated Credit Agreement;
• limiting our flexibility in planning for, or reacting to, and increasing our vulnerability to, changes in our
business, the industry in which we operate and the general economy; and
• placing us at a competitive disadvantage compared to our competitors that are less leveraged.
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