Long-Term Debt

12 Months Ended

Dec. 29, 2019

Long-term debt consisted of the following:



	Year End
	December 29, 2019			December 30, 2018
Series 2019-1 Class A-2 Notes:
3.783% Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026	$	398,000		$	—
4.080% Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029	447,750			—
Series 2018-1 Class A-2 Notes:
3.573% Series 2018-1 Class A-2-I Notes, anticipated repayment date 2025	441,000			445,500
3.884% Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028	465,500			470,250
Series 2015-1 Class A-2 Notes:
4.080% Series 2015-1 Class A-2-II Notes, repaid in connection with June 2019 refinancing	—			870,750
4.497% Series 2015-1 Class A-2-III Notes, anticipated repayment date 2025	478,750			483,750
7% debentures, due in 2025	82,837			90,769
Unamortized debt issuance costs	(33,526		)	(32,217		)
	2,280,311			2,328,802
Less amounts payable within one year	(22,750		)	(23,250		)
Total long-term debt	$	2,257,561		$	2,305,552

Aggregate annual maturities of long-term debt, excluding the effect of purchase accounting adjustments, as of December 29, 2019 were as follows:



Fiscal Year
2020	$	22,750
2021	22,750
2022	22,750
2023	22,750
2024	22,750
Thereafter	2,207,250
	$	2,321,000

Senior Notes

Wendy’s Funding, LLC, a limited-purpose, bankruptcy-remote, wholly-owned indirect subsidiary of The Wendy’s Company, is the master issuer (the “Master Issuer”) of outstanding senior secured notes under a securitized financing facility that was entered into in June 2015. As of December 29, 2019, the Master Issuer issued the following outstanding series of fixed rate senior secured notes: (i) 2019-1 Class A-2-I with an initial principal amount of $400,000; (ii) 2019-1 Class A-2-II with an initial principal amount of $450,000; (iii) 2018-1 Class A-2-I with an initial principal amount of $450,000; (iv) 2018-1 Class A-2-II with an initial principal amount of $475,000; and (v) 2015-1 Class A-2-III with an initial principal amount of $500,000 (collectively, the “Class A-2 Notes”). The Master Issuer also issued outstanding Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “Class A-1 Notes”), which allows for the borrowing of up to $150,000 from time to time on a revolving basis using various credit instruments, including a letter of credit facility. As of December 29, 2019, there were no borrowings outstanding under the Class A-1 Notes. The Class A-2 Notes and Class A-1 Notes are collectively the “Senior Notes.”

The Senior Notes are secured by a security interest in substantially all of the assets of the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly-owned indirect subsidiaries of the Company that act as guarantors (collectively, the “Securitization Entities”), except for certain real estate assets and subject to certain limitations as set forth in the indenture governing the Senior Notes (the “Indenture”) and the related guarantee and collateral agreements. The assets of the Securitization Entities include most of the domestic and certain of the foreign revenue-generating assets of the Company and its subsidiaries, which principally consist of franchise-related agreements, certain Company-operated restaurants, intellectual property and license agreements for the use of intellectual property.

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 dates for the Class A-2 Notes range from 2045 through 2049. If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to their respective anticipated repayment dates, which range from 2025 through 2029, additional interest will accrue pursuant to the Indenture.

The 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 Class A-1 Note agreement. There is a commitment fee on the unused portion of the Class A-1 Notes which ranges from 0.40% to 0.75% based on utilization. As of December 29, 2019, $24,756 of letters of credit were outstanding against the Class A-1 Notes, which relate primarily to interest reserves required under the Indenture.

Covenants and Restrictions

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 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 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 addition, the Indenture and the related management agreement contain various covenants that limit the Company and its subsidiaries’ ability to engage in specified types of transactions, subject to certain exceptions, including, for example, to (i) incur or guarantee additional indebtedness, (ii) sell certain assets, (iii) create or incur liens on certain assets to secure indebtedness or (iv) consolidate, merge, sell or otherwise dispose of all or substantially all of their assets.

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 29, 2019 and December 30, 2018, Wendy’s Funding had restricted cash of $34,209 and $29,538, 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 Class A-2 Notes.

Refinancing Transactions

In June 2019, the Master Issuer completed a refinancing transaction under which the Master Issuer issued the Series 2019-1 Class A-2-I Notes and the Series 2019-1 Class A-2-II Notes. The Master Issuer’s outstanding Series 2015-1 Class A-2-II Notes were redeemed as part of the transaction. As a result, the Company recorded a loss on early extinguishment of debt of $7,150 during 2019, which was comprised of the write-off of certain unamortized deferred financing costs. As part of the June 2019 refinancing transaction, the Master Issuer also issued the Class A-1 Notes. The Company’s previous Series 2018-1 Class A-1 Notes were canceled on the closing date and the letters of credit outstanding against the Series 2018-1 Class A-1 Notes were transferred to the Class A-1 Notes.

In January 2018, the Master Issuer completed a refinancing transaction under which the Master Issuer issued the Series 2018-1 Class A-2-I Notes and the Series 2018-1 Class A-2-II Notes. The net proceeds from the sale of the 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.

Debt Issuance Costs

During 2019, 2018 and 2017, the Company incurred debt issuance costs of $14,008, $17,580 and $351 in connection with the June 2019 and January 2018 refinancing transactions. During 2017, the Company also incurred debt issuance costs in connection with the 2015 securitization transaction of $561. The debt issuance costs are being amortized to “Interest expense, net” through the anticipated repayment dates of the Class A-2 Notes utilizing the effective interest rate method. As of December 29, 2019, the effective interest rates, including the amortization of debt issuance costs, were 4.7%, 3.8%, 4.1%, 4.0% and 4.2% for the Series 2015-1 Class A-2-III Notes, Series 2018-1 Class A-2-I Notes, Series 2018-1 Class A-2-II Notes, Series 2019-1 Class A-2-I Notes and Series 2019-1 Class A-2-II Notes, respectively.

Other Long-Term Debt

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 finance lease transactions. In December 2019, Wendy’s repurchased

$10,000 in principal of its 7% debentures for $10,550, including a premium of $500 and transaction fees of $50. As a result, the Company recognized a loss on early extinguishment of debt of $1,346 during the fourth quarter of 2019.

Wendy’s U.S. advertising fund has a revolving line of credit of $25,000, which 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. There were no borrowings or repayments under the line of credit during 2019.

At December 29, 2019, one of Wendy’s Canadian subsidiaries has 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 29, 2019.

Interest Expense

Interest expense on the Company’s long-term debt was $105,829, $107,929 and $108,472 during 2019, 2018 and 2017, respectively, which was recorded to “Interest expense, net.”

Pledged Assets

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



	Year End
	December 29, 2019
Cash and cash equivalents	$	33,042
Restricted cash and other assets (including long-term)	34,214
Accounts and notes receivable, net	31,879
Inventories	3,859
Properties	67,550
Other intangible assets	1,061,605
	$	1,232,149