What was Aunt Millies Bakeries receiving under the 2021 interest rate swap agreement?
Aunt_Millies_Bakeries Franchise · 2025 FDDAnswer from 2025 FDD Document
| ,169) | $ | 1,019,560 | $ | 993,393 | ||||
|---|---|---|---|---|---|---|---|---|
| Current-period change | _ | 307,182 | _ | (458,749) | - | (151,567) | ||
| September 30, 2022 | 2 | 281,013 | 560,811 | 841,826 | ||||
| Current-period change | - | _ | _ | (281,013) | _ | 556,711 | - | 275,698 |
| September 30, 2023 | $ | 2 | $ | $ | 1,117,522 | $ | 1,117,524 |
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 is $4,000,000 and expires November 30, 2023. The agreement requires 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 are $2,000,000, $4,000,000, and $4,000,000 and all expire November 30, 2023. The agreements require the Company to pay a fixed rate of 2.11%, 2.11%, and 2.81%, respectively, and receive 30 day LIBOR. The Company amended or terminated the interest rate swap agreements entered into in 2022 and 2021.
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. The agreements required the Company to pay a fixed rate and
Source: Item 23 — RECEIPT (FDD pages 44–196)
What This Means (2025 FDD)
According to Aunt Millies Bakeries's 2025 Franchise Disclosure Document, in 2021, the company entered into an interest rate swap agreement designed to hedge against rising interest rates related to its floating rate debt obligations. Under this agreement, Aunt Millies Bakeries was set to receive 30 day LIBOR. The initial notional amount of the agreement was $4,000,000, and it was scheduled to expire on November 30, 2023.
In these types of agreements, the notional amount is reduced over the term in proportion to the scheduled principal reductions of the related debt obligations being hedged. This means the amount covered by the swap decreases as the debt is paid down.
It's important to note that this specific interest rate swap agreement from 2021, along with others entered into in 2022, were later amended or terminated in February 2023. After this, Aunt Millies Bakeries discontinued hedge accounting, carrying the derivative at fair value in their consolidated financial statements and recognizing changes in fair value in current period income.