Long-Term Debt

Long-term debt consisted of the following:



	Year End
	December 30, 2018			December 31, 2017
Series 2018-1 Class A-2 Notes:
3.573% Series 2018-1 Class A-2-I Notes, anticipated repayment date 2025	$	445,500		$	—
3.884% Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028	470,250			—
Series 2015-1 Class A-2 Notes:
3.371% Series 2015-1 Class A-2-I Notes, repaid with 2018 refinancing	—			855,313
4.080% Series 2015-1 Class A-2-II Notes, anticipated repayment date 2022	870,750			879,750
4.497% Series 2015-1 Class A-2-III Notes, anticipated repayment date 2025	483,750			488,750
7% debentures, due in 2025	90,769			89,514
Capital lease obligations, due through 2045	455,636			467,964
Unamortized debt issuance costs	(32,217		)	(26,889		)
	2,784,438			2,754,402
Less amounts payable within one year	(31,655		)	(30,172		)
Total long-term debt	$	2,752,783		$	2,724,230

Aggregate annual maturities of long-term debt, excluding the effect of purchase accounting adjustments, as of December 30, 2018 were as follows:



Fiscal Year
2019	$	31,655
2020	30,871
2021	33,051
2022	869,638
2023	28,328
Thereafter	1,832,343
	$	2,825,886

On June 1, 2015, Wendy’s Funding, LLC (“Wendy’s Funding” or the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of The Wendy’s Company, entered into a base indenture and a related supplemental indenture (collectively, the “Indenture”) under which the Master Issuer may issue multiple series of notes. On the same date, the Master Issuer issued fixed rate senior secured notes in the following 2015-1 series: Class A-2-I (the “Series 2015-1 Class A-2-I Notes”) with an initial principal amount of $875,000, Class A-2-II (the “Series 2015-1 Class A-2-II Notes”) with an initial principal amount of $900,000 and Class A-2-III (the “Series 2015-1 Class A-2-III Notes”) with an initial principal amount of $500,000 (collectively, the “Series 2015-1 Class A-2 Notes”). In addition, the Master Issuer entered into a revolving financing facility of Series 2015-1 Variable Funding Senior Secured Notes, Class A-1 (the “Series 2015-1 Class A-1 Notes” and, together with the Series 2015-1 Class A-2 Notes, the “Series 2015-1 Senior Notes”), which allowed for the drawing of up to $150,000 under the Series 2015-1 Class A-1 Notes, which included certain credit instruments, including a letter of credit facility. The Series 2015-1 Class A-1 Notes were issued under the Indenture and allowed for drawings on a revolving basis. No amounts were borrowed under the Series 2015-1 Class A-1 Notes during 2018, 2017 and 2016.

The Series 2015-1 Senior Notes 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, real estate assets, and intellectual property and license agreements for the use of intellectual property, were contributed or otherwise transferred to the Master Issuer and certain other limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiaries of the Company that act as guarantors (the “Guarantors”) of the Series 2015-1 Senior Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Series 2015-1 Senior Notes.

Interest and principal payments on the Series 2015-1 Class A-2 Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Series 2015-1 Class A-2 Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the Series 2015-1 Class A-2 Notes is in June 2045, but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment dates of the Series 2015-1 Class A-2-II Notes and the Series 2015-1 Class A-2-III Notes will be seven and 10 years, respectively, from the date of issuance (the “Anticipated Repayment Dates”). If the Master Issuer has not repaid or refinanced the Series 2015-1 Class A-2 Notes prior to the respective Anticipated Repayment Dates, additional interest will accrue pursuant to the Indenture. As further discussed below, on January 17, 2018, the Master Issuer completed a refinancing transaction under which the proceeds received were used to redeem the Master Issuer’s outstanding Series 2015-1 Class A-2-I Notes.

On January 17, 2018, Wendy’s Funding completed a refinancing transaction under which the Master Issuer issued fixed rate senior secured notes in the following 2018-1 series: Class A-2-I (the “Series 2018-1 Class A-2-I Notes”) with an initial principal amount of $450,000 and Class A-2-II (the “Series 2018-1 Class A-2-II Notes”) with an initial principal amount of $475,000 (collectively, the “Series 2018-1 Class A-2 Notes”). Interest payments on the Series 2018-1 Class A-2 Notes are payable on a quarterly basis. The legal final maturity date of the Series 2018-1 Class A-2 Notes is in March 2048. The net proceeds from the sale of the Series 2018-1 Class A-2 Notes were used to redeem the Master Issuer’s outstanding Series 2015-1 Class A-2-I Notes, to pay prepayment and transaction costs and for general corporate purposes. As a result, the Company recorded a loss on early extinguishment of debt of $11,475 during 2018, which was comprised of the write-off of certain deferred financing costs and a specified make-whole payment. The Series 2018-1 Class A-2 Notes have scheduled principal payments of $9,250 annually from 2019 through 2024, $423,250 in 2025, $4,750 in each 2026 through 2027 and $427,500 in 2028.

Concurrently, the Master Issuer entered into a revolving financing facility of Series 2018-1 Variable Funding Senior Secured Notes, Class A-1 (the “Series 2018-1 Class A-1 Notes” and, together with the Series 2018-1 Class A-2 Notes, the “Series 2018-1 Senior Notes”), which allows for the drawing of up to $150,000 using various credit instruments, including a letter of credit facility. The Series 2015-1 Class A-1 Notes were canceled on the closing date and the letters of credit outstanding against the Series 2015-1 Class A-1 Notes were transferred to the Series 2018-1 Class A-1 Notes. The Series 2018-1 Senior Notes are secured by substantially all of the assets of the Master Issuer and the Guarantors, excluding certain real estate assets and subject to certain limitations. The Series 2018-1 Senior Notes and the remaining Series 2015-1 Class A-2 Notes are collectively the “Senior Notes.”

The Series 2018-1 Class A-1 Notes accrue interest at a variable interest 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 and as specified in the Series 2018-1 Class A-1 note agreement. There is a commitment fee on the unused portion of the Series 2018-1 Class A-1 Notes which ranges from 0.40% to 0.75% based on utilization. As of December 30, 2018, $26,746 of letters of credit were outstanding against the Series 2018-1 Class A-1 Notes which relate primarily to interest reserves required under the Indenture. No amounts were borrowed under the Series 2018-1 Class A-1 Notes during 2018.

During 2018 and 2017, the Company incurred debt issuance costs of $17,580 and $351, respectively, in connection with the issuance of the Series 2018-1 Senior Notes. During 2017, the Company also incurred debt issuance costs in connection with the issuance of the Series 2015-1 Senior Notes of $561. The debt issuance costs are being amortized to “Interest expense, net” through the Anticipated Repayment Dates of the Senior Notes utilizing the effective interest rate method. As of December 30, 2018, the effective interest rates, including the amortization of debt issuance costs, were 4.361%, 4.696%, 3.815% and 4.057% for the Series 2015-1 Class A-2-II Notes, Series 2015-1 Class A-2-III Notes, Series 2018-1 Class A-2-I Notes and Series 2018-1 Class A-2-II Notes, respectively.

The Senior Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Senior 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 Series 2015-1 Class A-2 Notes and Series 2018-1 Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, the assets pledged as collateral for the Senior Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The Senior 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 manager termination events, an event of default, and the failure to repay or refinance the Series 2015-1 Class A-2 Notes and Series 2018-1 Class A-2 Notes on the applicable scheduled maturity date. The Senior 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 Senior 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.

In accordance with the Indenture, certain cash accounts have been established with the Indenture trustee for the benefit of the trustee and the noteholders, and are restricted in their use. As of December 30, 2018 and December 31, 2017, Wendy’s Funding had restricted cash of $29,538 and $28,933, respectively, which primarily represents cash collections and cash reserves held by the trustee to be used for payments of principal, interest and commitment fees required for the Series 2015-1 Class A-2 Notes and Series 2018-1 Class A-2 Notes.

Wendy’s 7% debentures are unsecured and were reduced to fair value in connection with the Wendy’s Merger based on their outstanding principal of $100,000 and an effective interest rate of 8.6%. The fair value adjustment is being accreted and the related charge included in “Interest expense, net” until the debentures mature. These debentures contain covenants that restrict the incurrence of indebtedness secured by liens and certain capitalized lease transactions.

Wendy’s U.S. advertising fund has a revolving line of credit of $25,000. Neither the Company, nor Wendy’s, is the guarantor of the debt. The advertising fund facility was established to fund the advertising fund operations. During 2018, the Company borrowed and repaid $9,837 and $11,124, respectively, under the line of credit. The full amount of the line was available as of December 30, 2018. During 2017, the Company borrowed and repaid $31,130 and $29,843, respectively, under the line of credit.

At December 30, 2018, one of Wendy’s Canadian subsidiaries had a revolving credit facility of C$6,000 which bears interest at the Bank of Montreal Prime Rate. The debt is guaranteed by Wendy’s. The full amount of the line was available under this line of credit as of December 30, 2018.

The following is a summary of the Company’s assets pledged as collateral for certain debt:



	Year End
	December 30, 2018
Cash and cash equivalents	$	32,213
Restricted cash and other assets (including long-term)	29,645
Accounts and notes receivable, net	35,799
Inventories	3,667
Properties	263,083
Other intangible assets	1,079,800
	$	1,444,207