What was the total amount of New Money Loans issued at the time of the Out-of-Court Restructuring for Checkersrallys?
Checkersrallys Franchise · 2025 FDDAnswer from 2025 FDD Document
ditionally, the Second Lien was completely exchanged in
NOTES TO CONSOLIDATED FINANCIAL STATEMENTS - CONTINUED
favor of a pro rata share of Topco's equity. As a result, the Company's new parent became Topco which is owned by the Lenders of the previously held First and Second Liens.
The terms of the repayment of the debt outstanding under the Agreement called for the restructuring of the First Lien Loan into up to $25 million in New Money Loans and $75 million in Second Out Loans plus the issuance of 40% and 55% equity in Topco, respectively. We note that at the time of the restructuring, only $10 million in New Money Loans was issued. Additionally, the restructuring resulted in the complete cancellation of the Second Lien Loan in exchange for the issuance of 5% equity in Topco.
The New Money Loan accrues interest at a floating rate, to be determined at the Company's option, of either an alternative base rate plus 6% per annum or the Adjusted Term Secured Overnight Financing Rate plus 7% per annum plus a credit adjustment spread with the option to pay interest at a rate equal to 4% per annum in kind rather than in cash. The Second Out Loan accrues interest at a floating rate that equals, at the Company's option, either an alternative base rate plus 8% per annum or the Adjusted Term Secured Overnight Financing Rate plus 9% per annum plus a credit adjustment spread with the option to pay interest at a rate equal to 6% per annum in kind rather than in cash.
As part of issuing the New Money Loans, the Company funded $10 million out of the total $25 million commitment, Additionally, the Company was required to pay lenders' costs of $1.3 million. Accordingly, the Company allocated financing costs proportionally to the funded component and the unfunded component. The portion allocated to the funded balance is recorded as a reduction to long-term debt and the portion allocated to the unfunded balance is recorded as deferred financing cost asset. As of December 30, 2024 and January 1, 2024 the balance of these deferred financing costs associated with the unfunded balance was $0.5 million and $0.6 million, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 91)
What This Means (2025 FDD)
According to Checkersrallys's 2025 Franchise Disclosure Document, at the time of the Out-of-Court Restructuring, $10 million in New Money Loans was issued. This was part of a larger agreement that could have allowed for up to $25 million in New Money Loans. The restructuring also involved $75 million in Second Out Loans and the issuance of equity in Topco.
As part of issuing the New Money Loans, Checkersrallys funded $10 million out of the total $25 million commitment. Additionally, Checkersrallys was required to pay lenders' costs of $1.3 million. Accordingly, Checkersrallys allocated financing costs proportionally to the funded component and the unfunded component.
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, Checkersrallys 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.