What interest rate options does Checkersrallys have for the Second Out Loan?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
, 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. The Second Out Loans accrue interest at a floating rate, which can be, at the Company's option, (x) an alternative base rate plus 8.00% per annum or (y) the Adjusted Term Secured Overnight Financing Rate plus 9.00% per annum plus a credit adjustment spread. The Company has the option to pay interest on the Second Out Loans that has accrued at a rate equal to 6.00% per annum in kind, rather than in cash. The Second Out Loans mature on June 16, 2028. Additionally, the Company is required to make recurring quarterly principal payments on the Second Out Loans in the amount equivalent to 0.25% of the original principal amount. 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 di
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the Second Out Loans accrue interest at a floating rate. The specific interest rate is determined at Checkersrallys's option.
Checkersrallys can choose between two options: either an alternative base rate plus 8.00% per annum, or the Adjusted Term Secured Overnight Financing Rate plus 9.00% per annum, in addition to a credit adjustment spread. This means the actual interest rate can vary depending on the base rate or the Adjusted Term Secured Overnight Financing Rate at the time.
Additionally, Checkersrallys has the option to pay interest on the Second Out Loans that has accrued at a rate equal to 6.00% per annum in kind, rather than in cash. This means that instead of paying the interest in cash, the company can add the interest amount to the principal of the loan, effectively borrowing more money to cover the interest payment. This could be beneficial for cash flow management in the short term but would increase the overall debt and interest expenses in the long run.
The Second Out Loans mature on June 16, 2028, and require recurring quarterly principal payments equivalent to 0.25% of the original principal amount, with the remaining principal due upon maturity. Furthermore, the company is required to pay a contractual premium upon each principal repayment, which varies depending on the timing of the repayment: a make-whole provision calculated as a discounted amount of remaining interest payments prior to the first anniversary, 8% on or after the first anniversary but prior to the second anniversary, 7% on or after the second anniversary but prior to the third anniversary, 5% on or after the third anniversary, and 3% on or after the fourth anniversary.