What is the interest rate on the sale leaseback financing obligations for Aplus?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
weighted average interest rate on the total amount outstanding at December 31, 2023 was 7.54%. The Partnership was in compliance with all financial covenants at December 31, 2023. The Partnership's net leverage ratio was 3.66 to 1.00 at December 31, 2023.
Lease-Related Financing Obligations
Southside Oil, LLC, a subsidiary of the Partnership, is a party to a sale leaseback transaction that did not meet the criteria for sale leaseback accounting. This transaction was accounted for as a fi
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, Southside Oil, LLC, a subsidiary of Aplus's parent company, has a sale leaseback transaction accounted for as a financing arrangement. These obligations mature at various dates through 2058 and require monthly payments covering both interest and principal. The interest rate for these obligations is 11.865%. As of December 31, 2023, the balance of the sale leaseback financing obligation was $85 million.
This information is relevant for prospective Aplus franchisees as it provides insight into the financial obligations and arrangements of Aplus's parent company. While this specific debt is not directly incurred by franchisees, understanding the financial structure of the parent company can help franchisees assess the overall financial health and stability of the Aplus franchise system.
Sale leaseback transactions are a common financing strategy where a company sells an asset (in this case, likely real estate) to another party and then leases it back. This allows the company to free up capital while still retaining the use of the asset. The interest rate on these obligations reflects the cost of this financing arrangement. Franchisees should consider these factors as part of their due diligence when evaluating the long-term prospects of an Aplus franchise.