Long-Term Debt

6 Months Ended

Jun. 26, 2011

6. Long-Term Debt

Long-term debt consists of the following:


	June 26,			December 26,
	2011			2010
Senior Secured Notes due 2013	$	130,000		$	130,000
Senior Secured Notes unamortized debt discount		(195	)		(260	)
Senior Secured Revolving Credit Facility		5,200			—
Senior Unsecured Credit Facility		33,205			30,599
Mortgage		398			440
Other		933			421

		169,541			161,200
Less current portion		(169,234	)		(507	)

	$	307		$	160,693

Senior Secured Notes due 2013. On July 7, 2009 (the “Closing Date”), the Company completed an offering of $130,000 aggregate principal amount of 14.0% Senior Secured Notes due January 1, 2013 (the “Notes”), which are guaranteed (the “Guarantees”) by Holdco and all of the Company’s existing and future domestic restricted subsidiaries (together with Holdco, the “Guarantors”). The Notes were offered and sold in a private placement to qualified institutional buyers pursuant to Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”), a limited number of institutional accredited investors in the United States, and outside the United States in reliance on Regulation S under the Securities Act. The Notes were issued pursuant to an indenture, dated July 7, 2009 (the “Indenture”), by and among the Company, the Guarantors and Wells Fargo Bank, National Association, as trustee. The net proceeds from the issuance of the Notes were used to refinance a portion of the existing indebtedness, including repayment of the Company’s $105,000 senior secured notes due 2010 and to pay fees and expenses in connection therewith. Deferred debt fees of $6,596 were recorded related to the issuance of the Notes.

Effective June 28, 2010, the Company entered into a Supplemental Indenture, which amended the Indenture to permit affiliates of Sun Capital to acquire a majority of the stock of Holdco without requiring the Company to make a change of control offer to repurchase the Notes that would otherwise have been required under the Indenture.

Effective July 27, 2011, the Company entered into a Second Supplemental Indenture which provides for amendments to the existing Indenture. The Second Supplemental Indenture includes waivers and an amendment relating to a breach of the Consolidated Cash Flow covenant, as defined in the Indenture, for the period ended June 26, 2011, an amendment to provide that through October 31, 2011, the consent of the holders of at least 35% in aggregate principal amount of the then outstanding Notes will be required to declare all of the Notes to be due and payable upon an event of default, an amendment to provide that through October 31, 2011, in order for any noteholder to pursue a remedy with respect to the Indenture or the Notes, holders of at least 35% in aggregate principal amount of the then outstanding Notes will be required to make a written request to the trustee under the Indenture, waivers of certain breaches of the Indenture in connection with the Company’s failure to provide certain notices and timely set a special record date and payment date for the interest payment made on the Notes on July 28, 2011, and waivers of certain breaches and cross-defaults under the Company’s other significant debt agreements.

Prior to July 1, 2012, the Company may redeem some or all of the Notes at a premium ranging from 1-2% of the aggregate principal amount of the Notes redeemed. On or after July 1, 2012, the Company may redeem some or all of the Notes at 100% of the Notes’ principal amount, plus accrued and unpaid interest up to the date of redemption. Within 90 days of the end of each four fiscal quarter period ending on or near December 31, beginning in 2009, the Company must, subject to certain exceptions, offer to repay the Notes with 75% of the Excess Cash Flow (as defined in the Indenture) from the period, at 100% of the principal amount, plus any accrued and unpaid interest and liquidated damages. If the excess cash flow offer is prohibited by the terms of the Company’s GECC Credit Agreement, as amended, governing the Company’s Senior Secured Revolving Credit Facilities, the Company will deposit the amount that would have been used to fund the excess cash flow offer into an escrow account. Funds from the escrow account will be released to the Company only to repay borrowings under the Senior Secured Revolving Credit Facilities or to make an excess cash flow offer. No Excess Cash Flow Offer was required for 2010.

If the Company undergoes a change of control, the Company will be required to make an offer to each holder to repurchase all or a portion of their Notes at 101% of their principal amount, plus accrued and unpaid interest up to the date of purchase. If the Company sells assets outside the ordinary course of business and the Company does not use the net proceeds for specified purposes, the Company may be required to use such net proceeds to repurchase the Notes at 100% of their principal amount, together with accrued and unpaid interest up to the date of repurchase.

The terms of the Indenture generally limit the Company’s ability and the ability of the Company’s restricted subsidiaries to, among other things: (i) make certain investments or other restricted payments; (ii) incur additional debt and issue preferred stock; (iii) create or incur liens on assets to secure debt; (iv) incur dividends and other payment restrictions with regard to restricted subsidiaries; (v) transfer, sell or consummate a merger or consolidation of all, or substantially all, of the Company’s assets; (vi) enter into transactions with affiliates; (vii) change the Company’s line of business; (viii) repay certain indebtedness prior to stated maturities; (ix) pay dividends or make other distributions on, redeem or repurchase, capital stock or subordinated indebtedness; (x) engage in sale and leaseback transactions; or (xi) issue stock of subsidiaries.

The Notes and the Guarantees are secured by a second-priority security interest in substantially all of the assets of the Company and the Guarantors, including the pledge of 100% of all outstanding equity interests of each of the Company’s domestic subsidiaries. On the Closing Date, the Company and the Guarantors entered into a registration rights agreement, pursuant to which the Company and the Guarantors agreed for the benefit of the holders of the Notes to file with the SEC and cause to become effective a registration statement with respect to a registered offer to exchange the Notes for an issue of the Company’s senior secured notes with terms identical to the Notes in all material respects. The registration statement was declared effective on October 8, 2009. A shelf registration statement covering resales of the Notes was declared effective by the SEC on December 1, 2009.

Senior Secured Revolving Credit Facilities. The Second Amended and Restated Revolving Credit Agreement with General Electric Capital Corporation, as amended, (the “GECC Credit Agreement”) provides for a $15,000 revolving credit facility and $25,000 letter of credit facility, maturing on July 1, 2012 (collectively, the “Senior Secured Revolving Credit Facilities”). Under the Senior Secured Revolving Credit Facilities, the lenders agreed to make loans and issue letters of credit to and on behalf of the Company and its subsidiaries. Interest on the outstanding borrowings under the Senior Secured Revolving Credit Facilities is based on either prime rate plus Applicable Margin or ninety-day LIBOR plus Applicable Margin, as defined in and subject to certain restrictions in the 2009 amendment, which extended the due date and modified certain covenants and fees on the letters of credit issued thereunder accrue at a rate of 4.5% per annum. Deferred debt fees of $1,562 were recorded in 2009 related to the amendment.

Obligations under the Senior Secured Revolving Credit Facilities are guaranteed by all of the Company’s subsidiaries as well as by Holdco, which wholly owns the Company and has made a first priority pledge of all of its equity interests in the Company as security for the obligations. The Senior Secured Revolving Credit Facilities are secured by, among other things, first priority pledges of all of the equity interests of the Company’s direct and indirect subsidiaries, and first priority security interests (subject to customary exceptions) in substantially all of the current and future property and assets of the Company and its direct and indirect subsidiaries, with certain limited exceptions. As of June 26, 2011, the Company had $5,893 available under the letter of credit facility and $9,800 available under the revolving credit facility that may also be utilized for the letters of credit.

On April 2, 2010, the Company entered into an amendment to the GECC Credit Agreement which modified certain definitions in order to allow the transfer of shares in Holdco within current stockholders of Holdco. No such amendment was required related to the Notes as a result of such transfer.

On July 27, 2011, the Company entered into a Limited Waiver and Amendment No. 6 (“Amendment No. 6”) to the GECC Credit Agreement including waivers of certain breaches of the Leverage Ratio, Adjusted Leverage Ratio, Interest Coverage Ratio and Consolidated Cash Flow financial covenants for the period ended June 26, 2011, as defined in the GECC Credit Agreement, an amendment which provides that no default will be deemed to have occurred prior to November 15, 2011 solely by reason of any breach or violation of the financial covenants in the GECC Credit Agreement for the period ending September 25, 2011, and waivers of certain breaches and cross-defaults under the Company’s other significant debt agreements. In connection with Amendment No. 6, Sun Cantinas Finance, LLC, an entity affiliated with Sun Cantinas by common ownership (“Sun Finance”), purchased a $5,000 participation interest in the $15,000 revolving credit facility under the GECC Credit Agreement. Sun Finance has an option to purchase up to an additional $2,500 participation interest in the revolving credit facility. To the extent Sun Finance exercises its option to purchase such additional participation interest, the maximum amount the Company may borrow under the revolving credit facility will increase, and the maximum amount the Company may borrow under the letter of credit facility will decrease, each by an amount equal to the additional participation by Sun Finance. As a result of the Sun Finance participation in the GECC Credit Agreement, the Senior Secured Revolving Credit Facilities are held by related parties to the Company effective July 27, 2011.

The GECC Credit Agreement, as amended, contains various affirmative and negative covenants and restrictions, which among other things, require the Company to meet certain financial tests (including certain leverage and cash flow ratios), and limits the Company and its subsidiaries’ ability to incur or guarantee additional indebtedness, make certain capital expenditures, pay dividends or make other equity distributions, purchase or redeem capital stock, make certain investments, sell assets, engage in transactions with affiliates and effect a consolidation or merger. The agreement contains a cross-default provision wherein if the Company is in default on any other credit facilities, default on this facility is automatic. At June 26, 2011, the Company was in compliance with all specified financial and other covenants under the GECC Credit Agreement, as amended.

Senior Unsecured Credit Facility. In connection with the offering of the Notes, the Company entered into a Second Amended and Restated Credit Agreement, by and among the Company, Holdco, the lenders party thereto and Credit Suisse, Cayman Islands Branch (the “Senior Unsecured Credit Facility”), pursuant to which the principal balance of the existing unsecured loan owed by the Company under the existing senior unsecured credit facility, as amended, was reduced from $65,000 to $25,000 through (i) the assumption by Holdco of $25,000 of such unsecured debt and (ii) the exchange by a lender under the existing senior unsecured credit facility, as amended, of $15,000 of such unsecured debt for $4,583 aggregate principal amount of Notes (which were issued for $4,125), resulting in a gain on extinguishment of debt of $10,875. Deferred debt fees of $161 were recorded related to the Senior Unsecure Credit Facility. Interest accrues at an annual rate of 16.5% and is payable quarterly, provided that (i) such interest is payable in kind for the first four quarters following the Closing Date and (ii) thereafter will be payable in a combination of cash and in kind. The term of the Company’s credit facility was extended to July 1, 2013 and certain covenants were modified. Certain lenders to the Senior Unsecured Credit Facility are owners of Holdco, and as a result, the Senior Unsecured Credit Facility is held by related parties to the Company.

On July 27, 2011, the Company entered into a Limited Waiver and First Amendment to the Senior Unsecured Credit Facility which includes waivers of certain breaches and cross-defaults under the Company’s other significant debt agreements.

The Senior Unsecured Credit Facility, as amended, contains various affirmative and negative covenants which, among other things, limits the Company’s and its subsidiaries’ ability to incur or guarantee additional indebtedness, grant certain liens, make certain restricted payments, make capital expenditures, engage in transactions with affiliates, make certain investments, sell its assets, make acquisitions, effect a consolidation or merger and amend or modify instruments governing certain indebtedness (including relating to the Company’s Notes and the Senior Secured Revolving Credit Facilities), and includes certain cross-default language related to the Company’s other significant debt agreements. At June 26, 2011, the Company was in compliance with all specified financial and other covenants under the Senior Unsecured Credit Facility.

Senior Unsecured Credit Facility — Holdco In connection with the offering of the Notes and as a result of the assumption by Holdco of $25,000 noted above, Holdco entered into a Credit Agreement governing a $25,000 Holdings Term Loan Facility, (the “Senior Unsecured Credit Facility — Holdco”), with a maturity date of January 1, 2014. Interest accrues at an annual rate of 20% and is payable in kind. The balance at June 26, 2011 is $35,214. The Company has no obligation related to Senior Unsecured Credit Facility — Holdco and as such it is not included in the Consolidated Balance Sheets at June 26, 2011.

Mortgage. In 2005, concurrent with an acquisition, the Company assumed an $816 mortgage secured by the building and improvements of one of the restaurants acquired in the transaction. The mortgage carries a fixed annual interest rate of 9.28% and requires equal monthly payments of principal and interest through April 2015. As of June 26, 2011, the principal amount outstanding on the mortgage was $398.

Interest rates for the Company’s long-term debt are shown in the following table:


	June 26,			December 26,
	2011			2010
Senior Secured Notes due 2013		14.00	%		14.00	%
Senior Secured Revolving Credit Facilities		9.25	%		9.25	%
Senior Unsecured Credit Facility		16.50	%		16.50	%
Mortgage		9.28	%		9.28	%
Other		3.14 to 3.20	%		3.20 to 4.70	%