What is the 'Second Lien Restated Credit Agreement' for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
nner as the amendments to Holdings First Lien Restated Credit Agreement and Second Lien Restated Credit Agreement dated August 21, 2019 as well as Holdings Second Amendment to the Amended and Restated First Lien and Second Lien Credit Agreements dated December 31, 2020 as discussed above.
Amendment to Related Party Credit Facility
On August 21, 2019, Holdings entered into an amendment to the First Lien Credit Agreement (the "First Lien Restated Credit Agreement") with Jefferies Finance LLC continuing as administrative agent, joint lead arranger and joint bookrunner, and the financial institutions party thereto. Holdings also entered into an amendment to the Second Lien Credit Agreement (the "Second Lien Restated Credit Agreement") with Wilmington Trust, National Association (as successor to Jefferies Finance LLC), as administrative agent and collateral agent for the lenders party thereto.
Holdings Restated Credit Agreement converted $19.9 million in aggregate principal amount of Revolver into Restatement Date Term Loans ("RDTL") maturing April 25, 2022 leaving $5.1 million of Revolver. Within fiscal 2021, the maturity date of the RDTL and Revolver was extended to April 25, 2023.
Holdings Restated Credit Agreement amended the terms in that any interest on the loans accrued on or prior to June 14, 2021, shall be payable "in kind", which interest shall be capitalized and added to the outstanding principal balance of the loans on the applicable interest payment dates. The capitalized interest was deemed to be principal on the loan and interest accrued on the capitalized interest until June 14, 2021. Within fiscal 2021, the treatment of interest as payable "in kind" was extended beyond June 14, 2021 through the maturity date of the Second Lien.
Borrowings under the Term Loans incurred interest at a floating rate which was, at Holdings' option, (i) the London Interbank Offer Rate ("LIBOR") for a specified interest period plus an applicable margin, or (ii) an alternative base rate, plus an applicable margin.
Second Amendment to Related Party Credit Facility
On December 31, 2020, (i) the Company entered into the Second Amendment to the Amended and Restated First Lien Credit Agreement ("Second Amendment to First Lien") and (ii) the Company and BossCo Holdings entered into the Exchange Agreement and Second Amendment and Joinder to Amended and Restated Second Lien Credit Agreement ("Second Amendment to Second Lien").
(Tabular Dollars in Thousands, Except Share and per Share Data)
The Second Amendment to First Lien extended the maturity of the Related Party Restatement Date Term Loan and Related Party Revolver from April 25, 2022 to April 25, 2023. The Second Amendment to First Lien also amended the leverage ratio covenant. The change in terms under the Second Amendment to First Lien were recorded as a modification as the amendment did not significantly impact the amount or timing of the cash flows. The modification resulted in an increase to deferred issuing costs of $1.6 million. In addition, the Company incurred $0.3 million of third-party costs that were expensed within "general and administrative expenses" within the Consolidated Statements of Operations for the year ended January 3, 2022. There was no gain or loss recorded as part of the Second Amendment to First Lien.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the 'Second Lien Restated Credit Agreement' is referenced in the context of financial restructuring and debt agreements involving Checkersrallys's parent company, Holdings, and its affiliates. Specifically, on August 21, 2019, Holdings entered into an amendment to the Second Lien Credit Agreement, creating the 'Second Lien Restated Credit Agreement,' with Wilmington Trust, National Association, acting as the administrative agent and collateral agent for the lenders.
The document also mentions an earlier 'Second Lien Credit Agreement' from April 25, 2017, which was part of a broader credit arrangement that included a first lien credit agreement. The 2017 agreement involved an $87.5 million Second Lien Term Loan maturing on April 25, 2025. These loans were used to fund a merger, and Checkersrallys guaranteed the obligations under this agreement through an intercompany allocation agreement.
In June 2023, Checkersrallys underwent an out-of-court restructuring, which involved soliciting consents from lenders under both the First and Second Lien Credit Agreements. This restructuring resulted in a change of equity ownership and the deconsolidation of Burger BossCo and its subsidiaries from BossCo Holdings. The 'Second Lien Restated Credit Agreement' is therefore a key component of Checkersrallys's financial history, reflecting its debt obligations and restructuring efforts. A prospective franchisee should be aware of these past financial restructurings as they provide insight into the financial stability and management of Checkersrallys.