What is the 'First Lien Credit Agreement' for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
ossCo, which was a wholly owned subsidiary of Burger BossCo Holdings, Inc. ("BossCo Holdings" or "Parent"). BossCo Holdings was a holding company controlled by various funds operated by Oak Hill Capital Partners ("Oak Hill").
Successor
On June 5, 2023, Burger BossCo, Holdings, CDI, and certain of their affiliates commenced solicitation of consents to an out-of-court restructuring of the capital structure of Burger BossCo (the "Out-of-Court Restructuring") from holders of (a) loans under that certain Amended and Restated First Lien Credit Agreement, dated as of August 21, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the "First Lien Credit Agreement" and such loans, the "First Lien Loans"), by and among Holdings, Burger BossCo, the lenders from time to time party to the First Lien Credit Agreement (the "First Lien Lenders"), and Jefferies Finance LLC, as administrative agent and collateral agent for the First Lien Lenders, and (b) loans under that certain Amended and Restated Second Lien Credit Agreement, dated as of August 21, 2019 (as amended, restated, supplemented or otherwise modified from time to time, the "Second Lien Credit Agreement" and such loans, the "Second Lien Loans"), by and among Holdings, Burger BossCo, the lenders from time to time party to the Second Lien Credit Agreement (the "Second Lien Lenders"), and Wilmington Trust, National Association, as administrative agent and collateral agent for the Second Lien Lenders. Checkers obtained consents to the Out-of-Court Restructuring from all of the First Lien Lenders and all of the Second Lien Lenders and consummated the Out-of-Court Restructuring on June 16, 2023, whereby Burger BossCo and its subsidiaries were deconsolidated from BossCo Holdings, newly issued equity of Burger BossCo was issued to Checkers Topco, LLC ("Topco"), the secured creditors of Holdings and Burger BossCo acquired all of the equity of Topco, and the equity of Burger BossCo owned by BossCo Holdings was repurchased by Burger BossCo for a nominal amount.
As part of the Out-of-Court Restructuring, each First Lien Lender was provided with the right to elect to provide up to pro rata share of commitments to make $25 million in "First-Out Delayed Draw Term Loans" ("New Money Loans") under that certain Credit Agreement, dated as of June 16, 2023 (as amended, restated, supplemented or otherwise modified from time to time, the "Credit Agreement" and such commitments, the "New Money Commitments"), by and among Holdings, CDI, Burger BossCo, the persons party thereto from time to time as "Lenders" thereunder, and Jefferies Finance LLC, as the administrative agent and the collateral agent for such lenders. The New Money Loans accrue interest at a floating rate, which can be, at the Company's option, (x) an alternative base rate plus 6.00% per annum or (y) the Adjusted Term Secured Overnight Financing Rate plus 7.00% per annum plus a credit adjustment spread. The Company has the option to pay interest on the New Money Loans that has accrued at a rate equal to 4.00% per annum in kind, rather than in cash. The New Money Loans mature on June 16, 2027. Additionally, the Company is required to make recurring quarterly principal payments on the New Money Loans in the amount equivalent to 0.25% of the original principal amount which may increase upon additional borrowings. The remainder of the principal amount is due upon maturity. Upon each principal repayment, the Company is required to pay a contractual premium, equal to (i) prior to the first anniversary, a make-whole provision calculated as a discounted amount of remaining interest payments prior to the first anniversary (ii) 7% on or after the first anniversary, but prior to the second anniversary, (iii) 5% on or after the second anniversary, but prior to the third anniversary, and (iv) 3% on or after the third anniversary.
Pursuant to the Out-of-Court Restructuring, each First Lien Lender exchanged all of its First Lien Loans for (i) if such First Lien Lender did not elect to provide New Money Commitments, its pro rata share of (a) 55% of the equity of Topco and (b) $75 million in "Last-Out Term Loans" under the New Credit Agreement (the "Second Out Loans"), or (ii) if such First Lien Lender did elect to provide New Money Commitments, (a) its pro rata share of 55% of the equity of Topco, (b) its pro rata share of Second Out Loans, (c) its adjusted pro rata share (based on the amount of New Money Commitments provided by such First Lien Lender) of 40% of the equity of Topco and (d) the amount of New Money Loans funded by such First Lien Lender on the effective date of the Out-of-Court Restructuring pursuant to its New Money Commitments.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the First Lien Credit Agreement is related to the company's debt and restructuring activities. On April 25, 2017, Holdings entered into a First Lien Credit Agreement and a Second Lien Credit Agreement with Jefferies Finance LLC. The First Lien Credit Agreement included a $192.5 million First Lien Term Loan maturing on April 25, 2024, and a $25.0 million Revolver maturing on April 25, 2022.
In August 2019, Holdings amended the First Lien Credit Agreement, resulting in the First Lien Restated Credit Agreement. Furthermore, in June 2023, Burger BossCo, Holdings, CDI, and their affiliates initiated an out-of-court restructuring involving holders of loans under the Amended and Restated First Lien Credit Agreement. Checkersrallys obtained consents for this restructuring from all First Lien Lenders, which was completed on June 16, 2023.
As a result of the Out-of-Court Restructuring, the First Lien Lenders exchanged their First Lien Loans. Those who did not provide New Money Commitments received a pro rata share of 55% equity in Topco and $75 million in Second Out Loans. Those who did provide New Money Commitments received a pro rata share of 55% equity in Topco, a share of Second Out Loans, an adjusted pro rata share of 40% equity in Topco, and the amount of New Money Loans they funded. The Second Out Loans accrue interest at a floating rate, which can be either an alternative base rate plus 8.00% per annum or the Adjusted Term Secured Overnight Financing Rate plus 9.00% per annum, including a credit adjustment spread. These loans mature on June 16, 2028, and require quarterly principal payments equivalent to 0.25% of the original principal amount, with a final payment due upon maturity. Additionally, the First Lien Lenders were provided with the right to elect to provide up to pro rata share of commitments to make $25 million in "First-Out Delayed Draw Term Loans" ("New Money Loans") under that certain Credit Agreement, dated as of June 16, 2023.
For a prospective Checkersrallys franchisee, understanding these details of the First Lien Credit Agreement and the associated restructuring is crucial. It provides insight into the financial obligations and stability of the parent company, which can indirectly affect the franchise operations. The franchisee should be aware of the debt structure, interest rates, and maturity dates, as these factors can influence the franchisor's ability to support and invest in the franchise system. It is advisable for potential franchisees to seek clarification from Checkersrallys regarding the implications of these financial arrangements on the franchise network.