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Debt Obligations
12 Months Ended
Dec. 28, 2019
Debt Disclosure [Abstract]  
Debt Obligations
(10) Debt Obligations
Long-term debt consists of the following components (in thousands):
December 28, 2019December 29, 2018
2018-1 Class A-2 Senior Secured Notes$317,600  $320,000  
Debt issuance costs, net of amortization(6,731) (8,226) 
Less: current portion of debt(3,200) (2,400) 
Long-term debt, net$307,669  $309,374  
As of December 28, 2019, the scheduled principle payments on debt were as follows (in thousands):
Fiscal year 2020$3,200  
Fiscal year 20213,200  
Fiscal year 20223,200  
Fiscal year 2023308,000  
Total$317,600  
Securitized Financing Facility
On November 14, 2018, the Company completed a recapitalization in which certain of the Company’s subsidiaries issued notes pursuant to an asset-backed securitization. The notes consisted of $320 million of Series 2018-1 4.970% Fixed Rate Senior Secured Notes, Class A-2 with an anticipated term of five years (the “Class A-2 Notes”). In connection with the issuance of the Class A-2 Notes, the Company also entered into a revolving financing facility of Series 2018-1 Variable Funding Senior Notes,
Class A-1 (the “Variable Funding Notes”), which permits borrowings of up to a maximum principal amount of $20 million, which may be used to issue letters of credit. A portion of the proceeds of the Class A-2 Notes was used to repay the $215 million of principal outstanding on the outstanding term loan and revolving credit facility and to pay related transaction fees. The additional net proceeds were used for general corporate purposes, which included a return of capital to the Company’s stockholders in 2018. No borrowings were outstanding under the Variable Funding Notes as of December 28, 2019 or December 29, 2018.
The Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “Notes” and were issued in a securitization transaction pursuant to which certain of the Company’s domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements and intellectual property, were contributed or otherwise transferred to the Issuer and certain other limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company that act as guarantors of the Notes and that have pledged substantially all of their assets.
Interest and principal payments on the Class A-2 Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Class A-2 Notes is subject to certain financial conditions set forth in the indenture. The legal final maturity date of the Notes is in December of 2048, but, unless earlier prepaid to the extent permitted under the indenture, the anticipated repayment date of the Class A-2 Notes is December 2023. If the Issuer has not repaid or refinanced the Class A-2 Notes prior to the anticipated repayment date, additional interest will accrue on the Notes.
The Variable Funding Notes accrue interest at a variable rate based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin, as more fully set forth in the Variable Funding Note Purchase Agreement. There is a commitment fee on the unused portion of the Variable Funding Notes facility, which is 50 basis points based on the utilization under the Variable Funding Notes facility. As of December 28, 2019 and December 29, 2018, $4.0 million and $5.0 million, respectively, of letters of credit were outstanding against the Variable Funding Notes, which relate primarily to interest reserves required under the indenture. There were no amounts drawn down on the letters of credit as of December 28, 2019 or December 29, 2018.
Total debt issuance costs incurred and capitalized in connection with the issuance of the Notes were $8.8 million. Previously capitalized financing costs of $1.5 million were expensed as a result of the refinancing in fiscal year 2018.
The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, that the assets pledged as collateral for the Notes are in stated ways defective or ineffective, and (iv) covenants relating to recordkeeping, access to information, and similar matters. The Notes are also subject to customary rapid amortization events provided for in the indenture, including events tied to failure to maintain stated debt service coverage ratios, the sum of global gross sales for specified restaurants being below certain levels on certain measurement dates, certain change of control and manager termination events, an event of default, and the failure to repay or refinance the Class A-2 Notes on the applicable scheduled maturity date. The Notes are also subject to certain customary events of default, including events relating to non-payment of required interest, principal or other amounts due on or with respect to the Notes, failure to comply with covenants within certain time frames, certain bankruptcy events, breaches of specified representations and warranties, failure of security interests to be effective, and certain judgments. As of December 28, 2019, the Company was in compliance with all financial covenants.
Senior credit facility
In January 2018, the Company entered into an amended senior secured credit facility (the “2018 Facility”), which replaced its senior secured credit facility dated June 30, 2016 (the “2016 Facility”). The 2018 Facility included a term loan facility in an aggregate principal amount of $100 million and a revolving credit facility up to an aggregate principal amount of $150 million. The Company used the proceeds from the 2018 Facility to refinance $133.8 million of indebtedness under the 2016 Facility and to pay a special dividend of $93.1 million to its stockholders. Borrowings under the 2018 Facility bore interest, payable quarterly, at the Company’s option, at the base rate plus a margin (0.75% to 1.75%, dependent on the Company’s reported leverage ratio) or LIBOR plus a margin (1.75% to 2.75%, dependent on the Company’s reported leverage ratio). The 2018 Facility had a maturity date of January 2023.
In conjunction with the 2018 Facility, the Company evaluated the refinancing of the 2016 Facility and determined $202.5 million should be accounted for as a debt modification and $47.5 million should be new debt issuance. The Company incurred $1.0 million in financing costs of which $0.2 million was expensed and $0.8 million was capitalized.