Were the terms of the Related Party Credit Facility amended for Checkersrallys, and if so, how?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
y the Company for the related party note were recorded in "principal payments on related party note" in the accompanying consolidated statements of cash flows, and draws and repayments under the related party revolver were recorded in "borrowings under related party revolver" and "payments on related party revolver", respectively. The terms of the Related Party Credit Facility were amended in the same manner 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.
Under the Second Amendment to Second Lien, on December 31, 2020, 50% of the aggregate principal amount of Related Party Second Lien Term Loans outstanding (including all accrued and unpaid interest thereon) were exchanged for Series C-1 Preferred Stock of BossCo Holdings. The aggregate principal amount of Related Party Second Lien Term Loans and accrued interest exchanged for Series C-1 Preferred Stock was $52.4 million.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, the terms of the Related Party Credit Facility were amended in a similar manner to amendments made to Holdings' First Lien Restated Credit Agreement and Second Lien Restated Credit Agreement dated August 21, 2019, as well as Holdings' Second Amendment dated December 31, 2020.
On August 21, 2019, Holdings amended the First Lien Credit Agreement, converting $19.9 million of Revolver principal into Restatement Date Term Loans (RDTL) maturing on April 25, 2022, leaving $5.1 million in the Revolver. The maturity date of the RDTL and Revolver was later extended to April 25, 2023. The terms were further amended such that interest on loans accrued on or before June 14, 2021, would be payable "in kind," capitalized, and added to the outstanding principal balance, with interest accruing on the capitalized interest until June 14, 2021. This treatment of interest as payable "in kind" was extended beyond June 14, 2021, through the maturity date of the Second Lien.
On December 31, 2020, Checkersrallys entered into the Second Amendment to the Amended and Restated First Lien Credit Agreement, which extended the maturity of the Related Party Restatement Date Term Loan and Related Party Revolver from April 25, 2022, to April 25, 2023, and amended the leverage ratio covenant. Under the Second Amendment to Second Lien, 50% of the aggregate principal amount of Related Party Second Lien Term Loans outstanding (including all accrued and unpaid interest thereon) were exchanged for Series C-1 Preferred Stock of BossCo Holdings, totaling $52.4 million. Burger BossCo Intermediate, Inc. received a capital contribution from Parent of $52.9 million, which was then paid to the Second Lien lenders.