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Long-Term Debt
 12 Months Ended
Jan. 02, 2022
Debt Disclosure [Abstract]  
Long-Term Debt Long-Term Debt
Long-term debt consisted of the following:
Year End
January 2,
2022		January 3,
2021
Series 2021-1 Class A-2 Notes:
2.370% Series 2021-1 Class A-2-I Notes, anticipated repayment date 2029
$447,750 $— 
2.775% Series 2021-1 Class A-2-II Notes, anticipated repayment date 2031
646,750 — 
Series 2019-1 Class A-2 Notes:
3.783% Series 2019-1 Class A-2-I Notes, anticipated repayment date 2026
368,000 386,000 
4.080% Series 2019-1 Class A-2-II Notes, anticipated repayment date 2029
414,000 434,250 
Series 2018-1 Class A-2 Notes:
3.573% Series 2018-1 Class A-2-I Notes, repaid in connection with the June 2021 refinancing
— 436,500 
3.884% Series 2018-1 Class A-2-II Notes, anticipated repayment date 2028
456,000 460,750 
Series 2015-1 Class A-2 Notes:
4.497% Series 2015-1 Class A-2-III Notes, repaid in connection with the June 2021 refinancing
— 473,750 
Canadian revolving credit facility— 1,962 
7% debentures, due in 2025
85,175 83,998 
Unamortized debt issuance costs(37,009)(30,085)
2,380,666 2,247,125 
Less amounts payable within one year(24,250)(28,962)
Total long-term debt$2,356,416 $2,218,163 

Aggregate annual maturities of long-term debt, excluding the effect of purchase accounting adjustments, as of January 2, 2022 were as follows:
Fiscal Year
2022$24,250 
202324,250 
202424,250 
2025114,250 
2026372,250 
Thereafter1,863,250 
$2,422,500 

Senior Notes

Wendy’s Funding, LLC (“Wendy’s Funding”), 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 January 2, 2022, the Master Issuer issued the following outstanding series of fixed rate senior secured notes: (i) 2021-1 Class A-2-I with an initial principal amount of $450,000; (ii) 2021-1 Class A-2-II with an initial principal amount of $650,000; (iii) 2019-1 Class A-2-I with an initial principal amount of $400,000; (iv) 2019-1 Class A-2-II with an initial principal amount of $450,000; and (v) 2018-1 Class A-2-II with an initial principal amount of $475,000 (collectively, the “Class A-2 Notes”). In connection with the issuance of the Series 2021-1 Class A-2 Notes, the Master Issuer also entered into a revolving financing facility of Series 2021-1 Variable Funding Senior Secured Notes, Class A-1 (the “2021-1 Class A-1 Notes”), which allows for the drawing of up to $300,000 on a revolving basis using various credit
instruments, including a letter of credit facility. No amounts were borrowed under the 2021-Class A-1 Notes during 2021. The Class A-2 Notes and the 2021-1 Class A-1 Notes are collectively referred to as the “Senior Notes.”

The Master Issuer’s issuance of the 2021-1 Class A-1 Notes in June 2021 replaced the Company’s previous $150,000 Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “2019-1 Class A-1 Notes”) and $100,000 Series 2020-1 Variable Funding Senior Secured Notes, Class A-1 (the “2020-1 Class A-1 Notes”). In March 2020, the Company drew down $120,000 under the Series 2019-1 Class A-1 Notes, which was fully repaid in July 2020. In June 2020, the Master Issuer issued the Series 2020-1 Class A-1 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 2048 through 2051. If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to their respective anticipated repayment dates, which range from 2026 through 2031, additional interest will accrue pursuant to the Indenture.

The 2021-1 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 (“LIBOR”) 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 respective purchase agreements for the 2021-1 Class A-1 Notes. There is a commitment fee on the unused portions of the 2021-1 Class A-1 Notes, which ranges from 0.40% to 0.75% based on utilization. As of January 2, 2022, $21,888 of letters of credit were outstanding against the 2021-1 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 January 2, 2022 and January 3, 2021, Wendy’s Funding had restricted cash of $27,188 and $33,635, 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 2021, the Master Issuer completed a refinancing transaction under which the Master Issuer issued the Series 2021-1 Class A-2-I Notes and the Series 2021-1 Class A-2-II Notes. A portion of the net proceeds from the sale of the Series 2021-1 Class A-2 Notes were used to repay in full the Master Issuer’s outstanding Series 2015-1 Class A-2-III Notes and Series 2018-1 Class A-2-I Notes, including the payment of prepayment and transaction costs. As a result of the refinancing, the Company recorded a loss on early extinguishment of debt of $17,917 during 2021, which was comprised of a specified make-whole payment of $9,632 and the write-off of certain unamortized deferred financing costs of $8,285. As part of the June 2021 refinancing transaction, the Master Issuer also issued the 2021-1 Class A-1 Notes. The Series 2021-1 Class A-1 Notes replaced the Company’s $150,000 Series 2019-1 Class A-1 Notes and $100,000 Series 2020-1 Class A-1 Notes, which were canceled on the closing date, and the letters of credit outstanding against the Series 2019-1 Class A-1 Notes were transferred to the Series 2021-1 Class A-1 Notes.

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.

Debt Issuance Costs

During 2021, 2020 and 2019, the Company incurred debt issuance costs of $20,873, $2,122 and $14,008 in connection with the June 2021 refinancing transaction, the issuance of the 2020-1 Class A-1 Notes and the June 2019 refinancing transaction, respectively. 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 January 2, 2022, the effective interest rates, including the amortization of debt issuance costs, were 4.1%, 4.0%, 4.2%, 2.6% and 2.9% for the Series 2018-1 Class A-2-II Notes, Series 2019-1 Class A-2-I Notes, Series 2019-1 Class A-2-II Notes, Series 2021-1 Class A-2-I Notes and Series 2021 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.

A Canadian subsidiary of Wendy’s has a revolving credit facility of C$6,000, which bears interest at the Bank of Montreal Prime Rate. Borrowings under the facility are guaranteed by Wendy’s. In March 2020, the Company drew down C$5,500 under the revolving credit facility, which the Company fully repaid through repayments of C$3,000 in the fourth quarter of 2020 and C$2,500 in the first quarter of 2021. As of January 2, 2022, the Company had no outstanding borrowings under the Canadian revolving credit facility.

Wendy’s U.S. advertising fund has a revolving line of credit of $25,000, which was established to support the advertising fund operations and bears interest at LIBOR plus 2.15%. Borrowings under the line of credit are guaranteed by Wendy’s. During 2020, the Company borrowed and repaid $29,397 under the revolving line of credit. There were no borrowings or repayments under the line of credit during 2021. As of January 2, 2022, the Company had no outstanding borrowings under the revolving line of credit.

The increased borrowings in 2020 were taken as precautionary measures to provide enhanced financial flexibility considering the uncertain market conditions arising from the COVID-19 pandemic.

Interest Expense

Interest expense on the Company’s long-term debt was $98,356, $106,116 and $105,829 during 2021, 2020 and 2019, 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
January 2,
2022
Cash and cash equivalents$29,201 
Restricted cash and other assets (including long-term)27,193 
Accounts and notes receivable, net41,964 
Inventories5,180 
Properties59,717 
Other intangible assets1,026,736 
$1,189,991