Are the Aplus Senior Notes secured or unsecured obligations?
Aplus Franchise · 2024 FDDAnswer from 2024 FDD Document
| | 23 | | Total long-term debt, net | $ | 3,580 | $ | 3,571 |
At December 31, 2023, scheduled future debt maturities were as follows:
| 2024 | $ — |
|---|---|
| 2025 | — |
| 2026 | — |
| 2027 | 1,011 |
| 2028 | 900 |
| Thereafter | 1,694 |
| Total | $ 3,605 |
Senior Notes
The terms of each tranche of the Partnership's senior notes (the "Senior Notes") are governed by indentures among the Partnership and Sunoco Finance Corp. (together, the "Issuers"), and certain other subsidiaries of the Partnership (the "Guarantors") and U.S. Bank National Association, as trustee. The Senior Notes are senior obligations of the Issuers and are guaranteed by all of the Partnership's existing subsidiaries and certain of its future subsidiaries. The Senior Notes and guarantees are unsecured and rank equally with all of the Issuers' and each Guarantor's existing and future senior obligations. The Senior Notes and guarantees are effectively subordinated to the Issuers' and each Guarantor's secured obligations, including obligations under the Partnership's Credit Facility (as defined below), to the extent of the value of the collateral securing such obligations, and structurally subordinated to all indebtedness and obligations, including trade payables, of the Partnership's subsidiaries that do not guarantee the Senior Notes.
On September 20, 2023, we and Sunoco Finance Corp. completed a private offering of $500 million in aggregate principal amount of 7.000% senior notes due 2028. These notes will mature on September 15, 2028 and interest is payable semi-annually on March 15 and September 15 of each year. The Partnership used the proceeds from the private offering to repay a portion of the outstanding borrowings under our Credit Facility.
The 6.000% Senior Notes due 2027 will mature on April 15, 2027 and interest is payable semi-annually on April 15 and October 15 of each year. The 5.875% Senior Notes due 2028 will mature on March 15, 2028 and interest is payable semi-annually on March 15 and September
Source: Item 22 — CONTRACTS (FDD page 68)
What This Means (2024 FDD)
According to Aplus's 2024 Franchise Disclosure Document, the Senior Notes are unsecured obligations. These notes are senior obligations of the Issuers, guaranteed by Aplus's existing and future subsidiaries. While unsecured, they rank equally with the Issuers' and each Guarantor's existing and future senior obligations. However, the Senior Notes and guarantees are effectively subordinated to the Issuers' and each Guarantor's secured obligations, such as those under the Credit Facility, based on the value of the collateral securing those obligations. They are also structurally subordinated to all indebtedness and obligations, including trade payables, of Aplus's subsidiaries that do not guarantee the Senior Notes.
In September 2023, Aplus and Sunoco Finance Corp. completed a private offering of $500 million in aggregate principal amount of 7.000% senior notes due 2028, maturing on September 15, 2028, with interest payable semi-annually on March 15 and September 15. The proceeds from this offering were used to repay a portion of the outstanding borrowings under Aplus's Credit Facility. Other senior notes include the 6.000% Senior Notes due 2027, the 5.875% Senior Notes due 2028, the 4.500% Senior Notes due 2029, and the 4.500% Senior Notes due 2030.
For a prospective franchisee, understanding the nature of these Senior Notes is crucial for assessing the financial stability and risk profile of Aplus. The fact that they are unsecured means that in the event of financial distress, these notes would be paid after secured obligations like the Credit Facility. This impacts the overall financial health and leverage of Aplus, which indirectly affects franchisees. Franchisees should consider these factors as part of their due diligence, evaluating how Aplus manages its debt and the potential implications for the franchise system's long-term viability.