What interest rate scenarios apply to Carls' Series 2018-1 Variable Funding Notes?
Carls Franchise · 2024 FDDAnswer from 2024 FDD Document
future subject to certain conditions.
The Series 2018-1 Class A-2 Notes were issued in three tranches: (i) $400,000 of Series 2018-1 4.250% Fixed Rate Senior Secured Notes, Class A-2-I, with an anticipated repayment date of June 2022; (ii) $350,000 of Series 2018-1 4.959% Fixed Rate Senior Secured Notes, Class A-2-II, with an anticipated repayment date of June 2025; and (iii) $250,000 of Series 2018-1 5.710% Fixed Rate Senior Secured Notes, Class A-2-III, with an anticipated repayment date of June 2028. The Series 2018-1 Class A-2 Notes have a legal final maturity date of June 2048. The Series 2018-1 Class A-2 Notes require scheduled quarterly principal payments of $2,500 with the first principal payment due December 20, 2018. The interest payments for the Series 2018-1 Class A-2 Notes are due quarterly in arrears on the 20th day of each March, June, September and December.
The Series 2018-1 Variable Funding Notes provide for senior secured revolving facility loans, and subfacilities for swingline loans and letters of credit, in an aggregate amount of $70,000. On October 26, 2022, the Series 2018-1 Variable Funding Notes were amended to extend the maturity date to September 2027, including options for renewal for two additional twelve-month terms (subject to certain conditions, including a minimum debt service coverage ratio). The Series 2018-1 Variable Funding Notes bear interest at a variable interest rate equal to (a) a commercial paper rate plus 3.00%, (b) the term SOFR rate plus 3.0
Source: Item 21 — FINANCIAL STATEMENTS (FDD pages 79–80)
What This Means (2024 FDD)
According to Carls' 2024 Franchise Disclosure Document, the Series 2018-1 Variable Funding Notes have a few scenarios for determining the variable interest rate. These notes provide loans and subfacilities for swingline loans and letters of credit up to $70,000. The maturity date for these notes was extended to September 2027, with options to renew for two additional 12-month terms, subject to certain conditions like maintaining a minimum debt service coverage ratio.
The interest rate on these notes is variable and is determined by how participating investors fund the borrowings. The interest rate will be one of the following: (a) a commercial paper rate plus 3.00%, (b) the term SOFR rate plus 3.00%, or (c) 2.00% plus the greater of (i) the Prime Rate, (ii) the Federal Funds rate plus 0.50%, or (iii) term SOFR plus 1.00%.
Carls is also required to pay a commitment fee of 0.50% per year for any unused commitments, and a letter of credit fee of 3.00% per year on outstanding non-cash collateralized letters of credit. Interest and other fees related to these notes are due quarterly in arrears on the 20th day of March, June, September, and December. As of January 31, 2024, Carls had no outstanding loan borrowings but had $22,647 in outstanding letters of credit, with a remaining availability of $47,353 under these notes.