What were the Series 2022-1 Notes used for by Del Taco?
Del_Taco Franchise · 2025 FDDAnswer from 2025 FDD Document
e letters of credit. As of September 29, 2024, we had $6.0 million in outstanding borrowings and had available borrowing capacity of $94.5 million, net of letters of credits issued of $49.5 million.
The net proceeds of the sale of the 2022 Notes were used to repay in full of $570.7 million in aggregate outstanding principal amount of the Company's Series 2019-1 Class A-2-I Notes, together with the applicable make-whole premium and unpaid interest, and was used to fund a portion of the Company's acquisition of Del Taco. As a result, the Company recorded a loss on early extinguishment of debt of $5.6 million during the second quarter of 2022, which was comprised of the write-off of certain deferred financing costs and a specified make-whole premium payment, and is presented in "Interest expense, net" in the consolidated statement of operations. Additionally, in connection with the 2022 Notes, the Company capitalized $17.4 million of debt issuance costs, which are being amortized into interest expense over the Anticipated Repayment Dates, utilizing the effective interest rate method. The costs related to our Variable Funding Notes are presented within "Other assets, net" and are being amortized over the Anticipated Repayment Date of February 2027 using the straight-line method. As of September 29, 2024, the effective interest rates, including the amortization of debt issuance costs, were 4.851%, 5.258%, 3.796%, and 4.347% for the Series 2019-1 Class A-2-II Notes, Series 2019-1 Class A-2-II Notes, Series 2022-1 Class A-2-II Notes, and Series 2022-1 Class A-2-II Notes, respectively.
Source: Item 21 — FINANCIAL STATEMENTS (FDD page 58)
What This Means (2025 FDD)
According to Del Taco's 2025 Franchise Disclosure Document, the Series 2022-1 Notes were used for two primary purposes. First, the proceeds from the sale of these notes were used to fully repay $570.7 million of the company's Series 2019-1 Class A-2-I Notes, which included covering the make-whole premium and any unpaid interest. Second, the funds were used to finance a portion of Jack in the Box's acquisition of Del Taco. This acquisition was completed on March 8, 2022.
In connection with issuing the 2022 Notes, Del Taco capitalized $17.4 million in debt issuance costs, which are being amortized into interest expense over the Anticipated Repayment Dates using the effective interest rate method. The company also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Secured Notes, which permits borrowings up to a maximum of $150.0 million. As of September 29, 2024, Del Taco had $6.0 million in outstanding borrowings and had available borrowing capacity of $94.5 million, net of letters of credits issued of $49.5 million.
For a prospective Del Taco franchisee, this information provides insight into the financial restructuring and strategic decisions made by the parent company, Jack in the Box, following the acquisition. Understanding how the acquisition was financed and the existing debt obligations can help franchisees assess the financial stability and long-term investment potential of the Del Taco franchise. The franchisee should also consider how these debt obligations might impact future franchise support, marketing initiatives, and overall brand development.