Long-Term Debt

3 Months Ended

Mar. 30, 2022

Denny's and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $25 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the facility to $450 million. Borrowings bear a tiered interest rate, which is based on the Company's consolidated leverage ratio. The maturity date for the credit facility is August 26, 2026.

The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than its insurance captive subsidiary). It includes negative covenants that are usual for facilities and transactions of this type. The credit facility also includes certain financial covenants with respect to a maximum consolidated leverage ratio and a minimum consolidated fixed charge coverage ratio. We were in compliance with all financial covenants as of March 30, 2022.

As of March 30, 2022, we had outstanding revolver loans of $171.5 million and outstanding letters of credit under the credit facility of $15.7 million. These balances resulted in unused commitments of $212.8 million as of March 30, 2022 under the credit facility.

As of March 30, 2022, borrowings under the credit facility bore interest at a rate of LIBOR plus 1.75% and the commitment fee, paid on the unused portion of the credit facility, was set to 0.25%.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 1.98% and 2.09% as of March 30, 2022 and December 29, 2021, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 4.19% and 4.44% as of March 30, 2022 and December 29, 2021, respectively.

Interest Rate Hedges

We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt. We initially designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable interest payments due on forecasted notional amounts. A summary of our interest rate swaps as of March 30, 2022 is as follows:


Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		Fixed Rate
			(In thousands)
Swaps designated as cash flow hedges
March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	104	2.44	%
October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	(59)	2.46	%
Dedesignated swaps
February 15, 2018	March 31, 2020	December 31, 2033	$	120,000	(1)	$	(23,309)	3.19	%
Total			$	290,000		$	(23,264)

(1) The notional amounts of the swaps entered into on February 15, 2018 increase periodically until they reach the maximum notional amount of $425.0 million on September 28, 2029.

Swaps Designated as Cash Flow Hedges

To the extent the swaps are highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in the Consolidated Statements of Operations but are reported as a component of other comprehensive income. The interest rate swaps entered into in 2015 are designated as cash flow hedges with unrealized gain and losses recorded as a component of accumulated other comprehensive loss, net.

As of March 30, 2022, the fair value of the swaps designated as cash flow hedges was a net asset of less than $0.1 million. One was recorded as an asset of $0.1 million as a component of other noncurrent assets and the other as a liability of $0.1 million as a component of other noncurrent liabilities. The designated swaps have an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive loss, net in our Consolidated Balance Sheets. See Note 13 for amounts recorded in accumulated other comprehensive loss related to interest rate swaps. We expect to reclassify approximately $3.4 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to swaps designated as cash flow hedges during the next twelve months.

Dedesignated Interest Rate Hedges

During the year ended December 30, 2020, we determined that a portion of the underlying cash flows related to our hedging relationship entered into in 2018 (“2018 Swaps”) were no longer probable of occurring over the term of the interest rate swaps. Accordingly, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified a portion of losses from accumulated other comprehensive loss, net to other nonoperating income, net in our Consolidated Statements of Operations and began amortizing the remaining amounts of unrealized losses related to the 2018 Swaps from accumulated other comprehensive loss, net into our Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the 2018 Swaps. For the quarter ended March 30, 2022, no unrealized losses were reclassified to interest expense, net related to the 2018 Swaps. For the quarter ended March 31, 2021, we reclassified unrealized losses of approximately $0.1 million to interest expense, net related to the 2018 Swaps. At March 30, 2022, approximately $64.2 million (before taxes) of unrealized losses remained in accumulated other comprehensive loss, net. We expect to amortize less than $0.1 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to dedesignated interest rate swaps during the next twelve months.

As a result of the dedesignated cash flow relationship related to the 2018 Swaps, changes in the fair value of the 2018 Swaps are recorded as a component of other nonoperating income, net in our Consolidated Statements of Operations. For the quarter ended March 30, 2022, we recorded income of approximately $20.3 million as a component of other nonoperating income, net related to the 2018 Swaps resulting from changes in fair value. For the quarter ended March 31, 2021, we recorded income of approximately $29.9 million as a component of other nonoperating income, net related to the 2018 Swaps resulting from changes in fair value. As of March 30, 2022, the fair value of the dedesignated interest rate swaps was a liability of $23.3 million, $0.3 million of which was recorded as a component of other current liabilities and $23.0 million of which was recorded as a component of other noncurrent liabilities in our Consolidated Balance Sheets.