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Debt

9 Months Ended

Sep. 25, 2012

Note 4 – Debt

The Company’s debt consisted of the following (in thousands):


	September 25, 2012		December 27, 2011
Term Loan	$	374,063	$	—
Senior Notes		190,000		—
Revolving Facility ($100 million)⁽¹⁾		—		—
Old Term Loan		—		197,700
Old Senior Subordinated Notes		—		175,000
Old Revolving Facility ($75 million)⁽¹⁾		—		—

		564,063		372,700
Less current portion		3,750		13,540

	$	560,313	$	359,160

⁽¹⁾

At September 25, 2012, the Company had $82.3 million of borrowing capacity available under its Revolving Facility, net of $17.7 million of outstanding letters of credit and at December 27, 2011, the Company had $57.3 million of borrowing capacity available under its Old Revolving Facility, net of $17.7 million of outstanding letters of credit.

The Company’s Senior Secured Credit Facilities were entered into as part of the Financing Transactions on December 28, 2011 and consist of a $100.0 million Revolving Facility and a $375.0 million Term Loan. Outstanding borrowings under the Revolving Facility bear interest at the London Interbank Offered Rate (“LIBOR”), the money market rate, or the base rate (as defined), plus in each case an applicable margin based upon a leverage ratio as defined in the credit agreement for the Senior Secured Credit Facilities. At September 25, 2012, the rate would have been the prevailing LIBOR rate plus the margin of 5.0% in the case of a LIBOR loan or the base rate (as defined) plus the margin of 4.0% in the case of a base rate loan. Availability under the Revolving Facility is reduced by letters of credit, of which $17.7 million were issued at September 25, 2012. Commitment fees are paid based upon the unused balance of the Revolving Facility and the fees are paid at 0.5%. Commitment fees and letter of credit fees are reflected as interest expense. The Revolving Facility is secured by substantially all of the Company’s assets and is due December 28, 2016.

On March 28, 2012, the Company refinanced the Term Loan. The refinancing lowered the spread over LIBOR to 4.0% from 5.25% on the Term Loan borrowings, and lowered the Term Loan LIBOR floor to 1.25% from 1.5%. The combined weighted average interest rate was 5.25% per annum at September 25, 2012,. The principal amount of the Term Loan amortizes in equal quarterly installments of $937,500 in an aggregate annual amount equal to 1% of the original principal amount of the Term Loan, with the balance payable at maturity. These quarterly installments may be reduced as a result of any voluntary or required prepayments made by the Company, which any such reductions will be applied on a prorated basis in accordance with the terms of the Credit Agreement. The term loan note is secured by substantially all of the Company’s assets and is due December 28, 2018.

The Company paid a soft call premium of $3.8 million in accordance with the terms of the Senior Secured Credit Facilities plus transaction related expenses of approximately $1.1 million to effectuate the refinancing. Based on the terms of this transaction, $3.2 million of these costs were capitalized as debt issuance costs and will be amortized over the term of the related debt. The remaining $1.7 million was recorded as debt extinguishment expense during the second quarter of 2012. No other changes were made to the Senior Secured Credit Facilities in the refinancing. Additionally, related debt issuance costs of approximately $3.4 million were written off to debt extinguishment expense during the second quarter of fiscal 2012.

The Senior Notes bear interest at the rate of 10.5% payable semi-annually in arrears on January 15 and July 15 until maturity of the Senior Notes on December 28, 2020. These Senior Notes are unsecured. The Senior Notes may be redeemed at any time prior to January 15, 2016 at a redemption price equal to 100% of the principal amount of Senior Notes redeemed plus a premium equal to the greater of (i) 1.0% of such amount or (ii) the excess of the present value of the redemption price payable for redemption as of January 15, 2016 and the interest payments through such date over the principal amount of the Senior Notes to be redeemed, plus accrued and unpaid interest as of the date of redemption. Effective January 15, 2016, these Notes may be redeemed at a redemption price of 105.250% of the principal amount of the Senior Notes to be redeemed plus accrued and unpaid interest until January 15, 2017, when the redemption price becomes 102.625% plus accrued and unpaid interest and remains such until January 15, 2018, when these Senior Notes can be redeemed at the face amount, plus accrued and unpaid interest. In June 2012 the Company completed an exchange offer which allowed the holders of Senior Notes to exchange the notes for an equal principal amount of Senior Notes that are registered under the Securities Act of 1933.

The Company’s debt facilities contain restrictions on additional borrowings, certain asset sales, capital expenditures, dividend payments, certain investments and related-party transactions, as well as requirements to maintain various financial ratios. At September 25, 2012, the Company was in compliance with all of its debt covenants.

Based upon the amount of excess cash flow generated during fiscal 2012 and the Company’s leverage at fiscal 2012 year end, each of which is defined in the credit agreement governing the Term Loan, the Company is required to make an excess cash flow mandatory prepayment. The excess cash flow mandatory prepayment is an annual requirement under the credit agreement and is due 95 days after the end of each fiscal year. The Company currently expects that it will be required to make a payment in 2013 of between $4.0 million and $6.0 million depending upon the amount of excess cash flow generated during the fiscal 2012 year and the Company’s leverage at fiscal 2012 year-end. As this is a preliminary estimate, the final excess cash flow mandatory prepayment could ultimately differ materially from the amounts reflected above and as such we have not reflected any of this estimate as a current liability.

The estimated fair value of the Company’s outstanding borrowings was as follows (in thousands):


	September 25, 2012		December 27, 2011
Term Loan	$	376,868	$	—
Senior Notes		216,600		—
Old Term Loan		—		197,700
Senior Subordinated Notes		—		179,156

	$	593,468	$	376,856

Carrying value	$	564,063	$	372,700

The Company measures the fair value of its debt facilities under a Level 2 observable input. However, the fair value estimates presented herein are not necessarily indicative of the amount that the Company’s debtholders could realize in a current market exchange.