What is the interest rate for the Last-Out Term Loans for Checkersrallys, and what options does the company have for paying interest?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
Last-Out Term Loans, maturing June 16, 2028, bearing interest at 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.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the Last-Out Term Loans, which mature on June 16, 2028, bear interest at a floating rate. Checkersrallys has the option to choose between two interest rate structures: either an alternative base rate plus 8% per annum, or the Adjusted Term Secured Overnight Financing Rate plus 9% per annum, in addition to a credit adjustment spread.
Checkersrallys also has the option to manage its cash flow by paying interest in kind, rather than in cash, at a rate of 6% per annum. This means that instead of paying the interest amount in cash, the interest can be added to the principal amount of the loan, increasing the total debt.
As of December 30, 2024, the effective interest rate for these Last-Out Term Loans was 15.16%, and as of January 1, 2024, it was 15.18%. This indicates the actual cost of borrowing considering the applicable base rate, the spread, and any other fees or adjustments. These loans originated from an Out-of-Court Restructuring where First Lien Lenders exchanged their loans for equity in Topco and Last-Out Term Loans.