When did all of the interest rate swap agreements that Aunt Millies Bakeries entered into in 2022 expire?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
| 41,826 | ||||||||
|---|---|---|---|---|---|---|---|---|
| Current-period change | · | _: | (281,013) | _ | 556,711 | _ | 275,698 | |
| September 30, 2023 | 2 | - | 1,117,522 | 1,117,524 | ||||
| Current-period change | _ | _ | 281,065 | _ | 281,065 | |||
| September 30, 2024 | $ | 2 | $ | $ | 1,398,587 | $ | 1,398,589 |
NOTE 13 – INTEREST RATE SWAPS
In 2021, the Company entered into an interest rate swap agreement that is designed to hedge the Company's risk against rising interest rates related to its floating rate debt obligations (Note 5). The notional amount of the agreement is reduced throughout the term of the agreement in proportion to the scheduled principal reductions of the related debt obligations being hedged. The initial notional amount of the agreement was $4,000,000 and expired November 30, 2023. The agreement required the Company to pay a fixed rate of 1.30% and receive 30 day LIBOR. In 2022, the Company entered into additional interest rate swap agreements that are also designated to hedge the Company's risk against rising interest rates related to its floating debt obligations (Note 5). Similarly, the notional amounts of the agreements are reduced throughout the term of the agreements in proportion to the scheduled principal reductions of the related debt obligations being hedged. The initial notional amounts of the agreements were $2,000,000, $4,000,000, and $4,000,000 and all expired November 30, 2023. The agreements required the Company to pay a fixed rate of 2.11%, 2.11%, and 2.81%, respectively, and receive 30 day LIBOR.
In February 2023, the Company entered into four additional interest rate swap agreements that are also designated to hedge the Company's risk against rising interest rates related to its floating debt obligations (Note 5) with terms noted below.
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, the interest rate swap agreements that the company entered into in 2022 all expired on November 30, 2023. These agreements were designed to hedge against rising interest rates related to the company's floating debt obligations. The initial notional amounts for these agreements were $2,000,000, $4,000,000, and $4,000,000.
These agreements required Aunt Millies Bakeries to pay fixed rates of 2.11%, 2.11%, and 2.81%, respectively, and to receive 30-day LIBOR. However, in February 2023, the company amended or terminated the interest rate swap agreements entered into in 2022 and 2021. At the same time, Aunt Millies Bakeries entered into four additional interest rate swap agreements and discontinued hedge accounting because the previous agreements were amended or terminated, and the new interest rate swaps were not effective in offsetting changes in cash flows of the floating rate debt obligations.
This change in accounting means that Aunt Millies Bakeries now carries the derivative at fair value on its consolidated financial statements, recognizing changes in fair value in current period income in the consolidated statements of operations. The fair value of the derivatives designated as hedging instruments was $(62,678) and $177,184 September 30, 2024 and 2023, respectively. The fair value of the derivative (liability) asset was classified to current liabilities and current assets as of September 30, 2024 and 2023, respectively.