AFCE » Topics » Long Term Debt

This excerpt taken from the AFCE 10-K filed Mar 10, 2010.
Long Term Debt
 
2005 Credit Facility.  On May 11, 2005, and as amended and restated on April 14, 2006, April 27, 2007 and August 14, 2009, the Company entered into a bank credit facility (the “2005 Credit Facility”) with a group of lenders, which consisted of a $60.0 million, five-year revolving credit facility and a six-year $190.0 million term loan.
 
On August 14, 2009, the Company entered into the third amendment and restatement to the 2005 Credit Facility. Key terms of the amended and restated facility include the following:
 
  •  The term loan and revolving credit facility maturity dates were extended by two years to May 2013 and May 2012, respectively.
 
  •  The revolving credit facility commitment was reduced from $60.0 million to $48.0 million.
 
  •  The applicable interest rate for the term loan and revolving credit facility was set at LIBOR plus 4.50%, with a minimum LIBOR of 2.50%.
 
  •  The Company must maintain a Total Leverage Ratio of 3.00 to 1 or less through the end of first quarter of 2012 and 2.75 to 1 or less thereafter.
 
  •  The Company must prepay (i) 50% of Consolidated Excess Cash Flow (as defined in the 2005 Credit Facility) for such fiscal year if the Total Leverage Ratio is greater than 2.00 to 1 on the last day of such fiscal year or (ii) 25% of Consolidated Excess Cash Flow for such year if the Total Leverage Ratio is equal to or less than 2.00 to 1.
 
  •  The Company is permitted to resume its common stock repurchase program once the Total Leverage Ratio is less than 1.75 to 1. As of December 27, 2009, the Company’s Total Leverage Ratio was 1.95 to 1.
 
  •  To reduce interest rate risk, derivative instruments are required to be maintained on no less than 30% of the outstanding debt (see discussion below under the heading “Interest Rate Swap Agreements”).
 
In connection with the third amendment, the Company expensed $1.9 million, which is reported as a component of “Interest expense, net.” Additionally, the Company capitalized approximately $1.8 million of fees related to the new amendment as debt issuance costs which will be amortized over the remaining life of the facility utilizing the effective interest method.


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The revolving credit facility and term loan bear interest based upon alternative indices (LIBOR, Federal Funds Effective Rate, Prime Rate and a Base CD rate) plus an applicable margin as specified in the facility. The margins on the revolving credit facility may fluctuate because of changes in certain financial leverage ratios and the Company’s compliance with applicable covenants of the 2005 Credit Facility. The Company also pays a quarterly commitment fee of 0.625% on the unused portions of the revolving credit facility.
 
As of December 27, 2009, the Company had no loans outstanding under its revolving credit facility. Under the terms of the revolving credit facility, the Company may obtain other short-term borrowings of up to $10.0 million and letters of credit up to $25.0 million. Collectively, these other borrowings and letters of credit may not exceed the amount of unused borrowings under the 2005 Credit Facility. As of December 27, 2009, the Company had $1.3 million of outstanding letters of credit. Availability for short-term borrowings and letters of credit under the revolving credit facility was $46.7 million.
 
The 2005 Credit Facility is secured by a first priority security interest in substantially all of the Company’s assets. The 2005 Credit Facility contains financial and other covenants, including covenants requiring the Company to maintain various financial ratios, limiting its ability to incur additional indebtedness, restricting the amount of capital expenditures that may be incurred, restricting the payment of cash dividends, and limiting the amount of debt which can be loaned to the Company’s franchisees or guaranteed on their behalf. This facility also limits the Company’s ability to engage in mergers or acquisitions, sell certain assets, repurchase its common stock and enter into certain lease transactions. The 2005 Credit Facility includes customary events of default, including, but not limited to, the failure to pay any interest, principal or fees when due, the failure to perform certain covenant agreements, inaccurate or false representations or warranties, insolvency or bankruptcy, change of control, the occurrence of certain ERISA events and judgment defaults.
 
In addition to the scheduled payments of principal on the term loan, at the end of each fiscal year, the Company is subject to mandatory prepayments in those situations when consolidated cash flows for the year, as defined pursuant to the terms of the facility, exceed specified amounts. Whenever any prepayment is made, subsequent scheduled payments of principal are ratably reduced. The Company was subject to a mandatory prepayment of approximately $0.3 million and $2.8 million for fiscal year 2009 and 2008, respectively, which is recorded as a component of “Current debt maturities” in the Consolidated Balance Sheets.
 
As of December 27, 2009, the Company was in compliance with the financial and other covenants of the 2005 Credit Facility, as amended and restated. As of December 27, 2009 and December 28, 2008, the Company’s weighted average interest rate for all outstanding indebtedness under the 2005 Credit Facility was 7.2% and 5.8%, respectively.
 
Interest Rate Swap Agreements.  In accordance with the 2005 Credit Facility, as amended and restated, the Company uses interest rate swaps to fix the interest rate exposure on a portion of its outstanding term loan. As interest rate swaps are terminated, the effective portion of the termination loss is amortized as interest expense over the unexpired term of the swap.
 
As required by the third amendment and restatement to the 2005 Credit Facility, on September 10, 2009, the Company entered into new interest rate swap agreements limiting the interest rate exposure on $30.0 million of the term loan debt to a fixed rate of 7.40%. The term of the swap agreements expires August 31, 2011.
 
Net interest expense associated with these agreements was $1.3 million in 2009. Net interest income associated with these agreements was zero and $1.5 million for 2008, and 2007, respectively. The agreements are accounted for as an effective cash flow hedge. The changes in fair value are recognized in Accumulated other comprehensive loss in the Consolidated Balance Sheets. At December 27, 2009 and December 28, 2008, the fair value of the agreement was a liability to the Company of approximately $0.1 million and $0.5 million, respectively, which was recorded as a component of “Deferred credits and other long-term liabilities.”
 
These excerpts taken from the AFCE 10-K filed Mar 11, 2009.
Long Term Debt
 
2005 Credit Facility.  On May 11, 2005, and as amended on April 14, 2006 and April 27, 2007, we entered into a bank credit facility (the “2005 Credit Facility”) with J.P. Morgan Chase Bank and certain other lenders, which consists of a $60.0 million, five-year revolving credit facility and a six-year $190.0 million term loan.
 
The revolving credit facility and term loan bear interest based upon alternative indices (LIBOR, Federal Funds Effective Rate, Prime Rate and a Base CD rate) plus an applicable margin as specified in the facility. The margins on the revolving credit facility may fluctuate because of changes in certain financial leverage ratios and the Company’s compliance with applicable covenants of the 2005 Credit Facility. The Company also pays a quarterly commitment fee of 0.125% on the unused portions of the revolving credit facility.
 
As of December 28, 2008, the Company had loans outstanding under its revolving credit facility totaling $0.5 million. Under the terms of the revolving credit facility, the Company may obtain other short-term borrowings of up to $10.0 million and letters of credit up to $25.0 million. Collectively, these other borrowings and letters of credit may not exceed the amount of unused borrowings under the 2005 Credit Facility. As of December 28, 2008, the Company had $2.1 million of outstanding letters of credit. Availability for short-term borrowings and letters of credit under the revolving credit facility was $57.4 million.
 
The 2005 Credit Facility is secured by a first priority security interest in substantially all of our assets. The 2005 Credit Facility contains financial and other covenants, including covenants requiring us to maintain various financial ratios, limiting our ability to incur additional indebtedness, restricting the amount of capital expenditures that may be incurred, restricting the payment of cash dividends, and limiting the amount of debt which can be loaned to our franchisees or guaranteed on their behalf. This facility also limits our ability to engage in mergers or acquisitions, sell certain assets, repurchase our stock and enter into certain lease transactions. The 2005 Credit Facility includes customary events of default, including, but not limited to, the failure to pay any interest, principal or fees when due, the failure to perform certain covenant agreements, inaccurate or false representations or warranties, insolvency or bankruptcy, change of control, the occurrence of certain ERISA events and judgment defaults.
 
In addition to the scheduled payments of principal on the term loan, at the end of each fiscal year, we are subject to mandatory prepayments in those situations when consolidated cash flows for the year, as defined pursuant to the terms of the facility, exceed specified amounts (see additional information under the heading entitled Liquidity and Capital Resources within this Item 7). Whenever any prepayment is made, subsequent scheduled payments of principal are ratably reduced.
 
As of December 28, 2008, we were in compliance with the financial and other covenants of the 2005 Credit Facility. As of December 28, 2008, the Company’s weighted average interest rate for all outstanding indebtedness under the 2005 Credit Facility, including the effect of the interest swap agreements, was approximately 5.8%.
 
2005 Interest Rate Swap Agreements.  Effective May 12, 2005, we entered into two interest rate swap agreements with a combined notional amount of $130.0 million. Effective December 29, 2006, the Company reduced the notional amounts of the combined agreements to $110.0 million. The agreements terminated on June 30, 2008. The effect of the agreements was to limit the interest rate exposure on a portion of the 2005 credit facility to a fixed rate of 6.4%.
 
Effective for the period June 30, 2008 through June 30, 2010, the Company entered into an interest rate swap agreement with a notional amount of $100.0 million. Pursuant to this agreement, the Company pays a fixed rate of interest and receives a floating rate of interest. The effect of the agreement is to limit the interest rate exposure on a portion of the Term B debt outstanding under the 2005 Credit Facility to a fixed rate of 4.87%. Effective December 15, 2008, the Company reduced the notional amount of the agreement to $25 million. The effective portion of the loss associated with the termination of the $75 million notional amount, approximately $1.3 million, will be amortized into interest expense over the remaining life of the hedge.
 
Net interest income associated with these agreements was approximately zero, $1.5 million and $1.3 million for 2008, 2007 and 2006, respectively. The agreement is accounted for as an effective cash flow hedge. At December 28, 2008, the fair value of the agreement was a liability to the Company of approximately $0.5 million,


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which was recorded as a component of “Deferred credits and other long-term liabilities.” At December 27, 2007, the fair value of the agreements was recorded as a component of “Other long term assets, net” and was approximately $0.2 million. The changes in fair value are recognized in accumulated other comprehensive income in the Consolidated Balance Sheets.
 
Long Term
Debt



 



2005 Credit Facility.  On May 11,
2005, and as amended on April 14, 2006 and April 27,
2007, we entered into a bank credit facility (the “2005
Credit Facility”) with J.P. Morgan Chase Bank and
certain other lenders, which consists of a $60.0 million,
five-year revolving credit facility and a six-year
$190.0 million term loan.


 



The revolving credit facility and term loan bear interest based
upon alternative indices (LIBOR, Federal Funds Effective Rate,
Prime Rate and a Base CD rate) plus an applicable margin as
specified in the facility. The margins on the revolving credit
facility may fluctuate because of changes in certain financial
leverage ratios and the Company’s compliance with
applicable covenants of the 2005 Credit Facility. The Company
also pays a quarterly commitment fee of 0.125% on the unused
portions of the revolving credit facility.


 



As of December 28, 2008, the Company had loans outstanding
under its revolving credit facility totaling $0.5 million.
Under the terms of the revolving credit facility, the Company
may obtain other short-term borrowings of up to
$10.0 million and letters of credit up to
$25.0 million. Collectively, these other borrowings and
letters of credit may not exceed the amount of unused borrowings
under the 2005 Credit Facility. As of December 28, 2008,
the Company had $2.1 million of outstanding letters of
credit. Availability for short-term borrowings and letters of
credit under the revolving credit facility was
$57.4 million.


 



The 2005 Credit Facility is secured by a first priority security
interest in substantially all of our assets. The 2005 Credit
Facility contains financial and other covenants, including
covenants requiring us to maintain various financial ratios,
limiting our ability to incur additional indebtedness,
restricting the amount of capital expenditures that may be
incurred, restricting the payment of cash dividends, and
limiting the amount of debt which can be loaned to our
franchisees or guaranteed on their behalf. This facility also
limits our ability to engage in mergers or acquisitions, sell
certain assets, repurchase our stock and enter into certain
lease transactions. The 2005 Credit Facility includes customary
events of default, including, but not limited to, the failure to
pay any interest, principal or fees when due, the failure to
perform certain covenant agreements, inaccurate or false
representations or warranties, insolvency or bankruptcy, change
of control, the occurrence of certain ERISA events and judgment
defaults.


 



In addition to the scheduled payments of principal on the term
loan, at the end of each fiscal year, we are subject to
mandatory prepayments in those situations when consolidated cash
flows for the year, as defined pursuant to the terms of the
facility, exceed specified amounts (see additional information
under the heading entitled Liquidity and Capital Resources
within this Item 7). Whenever any prepayment is made,
subsequent scheduled payments of principal are ratably reduced.


 



As of December 28, 2008, we were in compliance with the
financial and other covenants of the 2005 Credit Facility. As of
December 28, 2008, the Company’s weighted average
interest rate for all outstanding indebtedness under the 2005
Credit Facility, including the effect of the interest swap
agreements, was approximately 5.8%.


 



2005 Interest Rate Swap
Agreements.
  Effective May 12, 2005, we
entered into two interest rate swap agreements with a combined
notional amount of $130.0 million. Effective
December 29, 2006, the Company reduced the notional amounts
of the combined agreements to $110.0 million. The
agreements terminated on June 30, 2008. The effect of the
agreements was to limit the interest rate exposure on a portion
of the 2005 credit facility to a fixed rate of 6.4%.


 



Effective for the period June 30, 2008 through
June 30, 2010, the Company entered into an interest rate
swap agreement with a notional amount of $100.0 million.
Pursuant to this agreement, the Company pays a fixed rate of
interest and receives a floating rate of interest. The effect of
the agreement is to limit the interest rate exposure on a
portion of the Term B debt outstanding under the 2005 Credit
Facility to a fixed rate of 4.87%. Effective December 15,
2008, the Company reduced the notional amount of the agreement
to $25 million. The effective portion of the loss
associated with the termination of the $75 million notional
amount, approximately $1.3 million, will be amortized into
interest expense over the remaining life of the hedge.


 



Net interest income associated with these agreements was
approximately zero, $1.5 million and $1.3 million for
2008, 2007 and 2006, respectively. The agreement is accounted
for as an effective cash flow hedge. At December 28, 2008,
the fair value of the agreement was a liability to the Company
of approximately $0.5 million,





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which was recorded as a component of “Deferred credits and
other long-term liabilities.” At December 27, 2007,
the fair value of the agreements was recorded as a component of
“Other long term assets, net” and was approximately
$0.2 million. The changes in fair value are recognized in
accumulated other comprehensive income in the Consolidated
Balance Sheets.


 




This excerpt taken from the AFCE 10-K filed Mar 14, 2007.
Long Term Debt
 
2005 Credit Facility.  On May 11, 2005, and as amended on April 14, 2006, we entered into a bank credit facility (the “2005 Credit Facility”) with J.P. Morgan Chase Bank and certain other lenders, which consists of a $60.0 million, five-year revolving credit facility and a six-year $190.0 million term loan.
 
The revolving credit facility and term loan bear interest based upon alternative indices (LIBOR, Federal Funds Effective Rate, Prime Rate and a Base CD rate) plus an applicable margin as specified in the facility. The margins on the revolving credit facility may fluctuate because of changes in certain financial leverage ratios and our compliance with applicable covenants of the 2005 Credit Facility. We also pay a quarterly commitment fee of 0.125% on the unused portions of the revolving credit facility.
 
At the closing of the 2005 Credit Facility, we drew the entire $190.0 million term loan and applied approximately $57.4 million of the proceeds to pay off the 2002 Credit Facility, to pay fees associated with that


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facility, and to pay closing costs associated with the new facility. The remaining proceeds were used to fund a portion of our special cash dividend and for general corporate purposes.
 
The 2005 Credit Facility is secured by a first priority security interest in substantially all of our assets. The 2005 Credit Facility contains financial and other covenants, including covenants requiring us to maintain various financial ratios, limiting our ability to incur additional indebtedness, restricting the amount of capital expenditures that may be incurred, restricting the payment of cash dividends, and limiting the amount of debt which can be loaned to our franchisees or guaranteed on their behalf. This facility also limits our ability to engage in mergers or acquisitions, sell certain assets, repurchase our stock and enter into certain lease transactions. The 2005 Credit Facility includes customary events of default, including, but not limited to, the failure to pay any interest, principal or fees when due, the failure to perform certain covenant agreements, inaccurate or false representations or warranties, insolvency or bankruptcy, change of control, the occurrence of certain ERISA events and judgment defaults.
 
Under the terms of the revolving credit facility, we may obtain other short-term borrowings of up to $10.0 million and letters of credit up to $25.0 million. Collectively, these other borrowings and letters of credit may not exceed the amount of unused borrowings under the 2005 Credit Facility. As of December 31, 2006, we had $5.3 million of outstanding letters of credit. Availability for other short-term borrowings and letters of credit was $29.7 million.
 
In addition to the scheduled payments of principal on the term loan, at the end of each fiscal year, we are subject to mandatory prepayments in those situations when consolidated cash flows for the year, as defined pursuant to the terms of the facility, exceed specified amounts. Whenever any prepayment is made, subsequent scheduled payments of principal are ratably reduced.
 
As of December 31, 2006, we were in compliance with the financial and other covenants of the 2005 Credit Facility. As of December 31, 2006, the Company’s weighted average interest rate for all outstanding indebtedness under the 2005 Credit Facility, including the effect of the interest swap agreements, was approximately 6.6%.
 
2005 Interest Rate Swap Agreements.  Effective May 12, 2005, we entered into two interest rate swap agreements with a combined notional amount of $130.0 million. Effective December 29, 2006, the Company reduced the notional amounts of the combined agreements to $110.0 million. The agreements terminate on June 30, 2008, or sooner under certain limited circumstances. The effective portion of the gain associated with the termination of the $20.0 million notional amount, approximately $0.3 million, will be amortized into interest expense over the remaining life of the hedge. Pursuant to these agreements, pay a fixed rate of interest and receive a floating rate of interest. The effect of the agreements is to limit the interest rate exposure on a portion of the 2005 Credit Facility to a fixed rate of 6.4%. During 2006, the net interest income associated with these agreements was $1.3 million. These agreements are accounted for as an effective cash flow hedge. At December 31, 2006, the fair value of these agreements was $1.6 million, which was recorded as a component of “other long term assets, net.” The changes in fair value are recognized in accumulated other comprehensive income in the Consolidated Balance Sheets.
 

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