What event led to the Credit Agreement that determined the new debt amount for Checkers?
Checkers Franchise · 2025 FDDAnswer from 2025 FDD Document
| Successor | ||||
|---|---|---|---|---|
| December 30, 2024 | January 1, 2024 | |||
| Obligations under premium financing arrangements, with short | $ | 976 | $ | 1,028 |
| term maturities. | ||||
| Last-Out Term Loans, maturing June 16, 2028, bearing interest at | 80,988 | 76,952 | ||
| an alternative base rate plus 8% or the Adjusted Term SOFR | ||||
| plus 9% plus a credit adjustment spread. Company has option | ||||
| to pay interest in kind at a rate equal to 6% rather than in cash. | ||||
| As of December 30, 2024 and January 1, 2024 the effective | ||||
| interest rates were 15.16% and 15.18%, respectively. | ||||
| New Money Loans, maturing June 16, 2027, bearing interest at an | 10,436 | 10,081 | ||
| alternative base rate plus 6% or the Adjusted Term SOFR plus | ||||
| 7% plus a credit adjustment spread. Company has option to pay | ||||
| interest in kind at a rate equal to 4% rather than in cash. As of | ||||
| December 30, 2024 and January 1, 2024 the effective interest | ||||
| rates were from 14.92% to 15%. | ||||
| Deferred financing and issuance costs | (341) | (447) | ||
| Total debt | 92,059 | 87,614 | ||
| Less: current maturities | (1,788) | (1,802) | ||
| Total debt, less current maturities | $ | 90,271 | $ | 85,812 |
March 2023 Default
On March 6, 2023, the Company failed to make a required interest payment which resulted in an event of default under the terms of the Senior Credit Facility. Upon an event of default, the Senior Credit Facility lenders may declare all amounts outstanding under the Senior Credit Facility due and payable. Upon notification of the event of default, the Company and the Senior Credit Facility lenders entered into a forbearance agreement that provided the Company, through June 20, 2023, a temporary waiver from paying the interest and principal amounts due under the Senior Credit Facility and an opportunity for the Company and lenders to negotiate a potential out-of-court restructuring transaction. The forbearance agreement would terminate on June 20, 2023, and absent a successful transaction all remedies under the Senior Credit Facility would become available to the lenders, including the right to demand payment of the outstanding obligations. The Company completed the Out-of-Court Restructuring on June 16, 2023.
Successor Debt Agreements
The Credit Agreement, which resulted from the Out-of-Court Restructuring, determined the new debt amount that would be held between the existing lenders and the Company. The First Lien lenders had the option to contribute, on a pro rata share, to fund new delayed draw term loans on a cash basis. As outlined in Note 1, the Lenders received varying pro rata equity shares of Topco depending on whether they elected to participate in the funding of the new debt.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkers's 2025 Franchise Disclosure Document, the Credit Agreement that determined the new debt amount resulted from an Out-of-Court Restructuring. This restructuring was initiated after Checkers failed to make a required interest payment on March 6, 2023, leading to an event of default under the terms of their Senior Credit Facility.
Following the default, Checkers and its Senior Credit Facility lenders entered into a forbearance agreement. This agreement temporarily waived interest and principal payments until June 20, 2023, providing an opportunity to negotiate a potential out-of-court restructuring transaction. The Credit Agreement, dated June 16, 2023, was the result of these negotiations.
As part of the Out-of-Court Restructuring, First Lien lenders were given the option to provide a pro rata share of commitments up to $25 million in "First-Out Delayed Draw Term Loans" under the Credit Agreement. The lenders also received varying pro rata equity shares of Topco, Checkers' new parent company, depending on their participation in funding the new debt. The Second Lien was completely exchanged for a pro rata share of Topco's equity.