Long-Term Debt

3 Months Ended

Mar. 25, 2020

Denny's and certain of its subsidiaries have a credit facility consisting of a five-year $400 million senior secured revolver (with a $30 million letter of credit sublimit). The credit facility includes an accordion feature that would allow us to increase the size of the revolver to $450 million. As of March 25, 2020, we had outstanding revolver loans of $318.0 million and outstanding letters of credit under the senior secured revolver of $19.3 million. These balances resulted in availability of $62.7 million under the credit facility. Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.39% and 3.47% as of March 25, 2020 and December 25, 2019, respectively. Taking into consideration our interest rate swaps, the weighted-average interest rate of outstanding revolver loans was 3.84% and 3.99% as of March 25, 2020 and December 25, 2019, respectively.

A commitment fee, which is based on our consolidated leverage ratio, is paid on the unused portion of the credit facility and was 0.30% as of March 25, 2020. Borrowings under the credit facility bear a tiered interest rate, also based on our consolidated leverage ratio, which was set at LIBOR plus 2.00% as of March 25, 2020. The maturity date for the credit facility is October 26, 2022.

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 our 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 25, 2020.

Amendment of Credit Facility

As a result of projecting that we would not be in compliance with certain financial covenants beginning for the quarter ending June 24, 2020 due to the impact of the COVID-19 pandemic, subsequent to the quarter ended March 25, 2020, the Company and certain of its subsidiaries entered into a second amendment to the current credit agreement (the “Second Amendment”) dated as of May 13, 2020 (the “Effective Date”), which amends the current credit agreement dated as of October 26, 2017 (the “Existing Credit Agreement”; the Existing Credit Agreement as amended by the Second Amendment, the “Amended Credit Agreement”).

Commencing with the Effective Date of the Second Amendment until the date of delivery of our financial statements for the fiscal quarter ending June 30, 2021, the interest rate of the Amended Credit Agreement shall be increased to LIBOR plus 3.00%. During this period, the Company will also have supplemental monthly reporting obligations to its lenders and will be prohibited from paying dividends and making stock repurchases and other general investments. Additionally, capital expenditures will be restricted to $10 million in the aggregate, beginning on the Effective Date through the fiscal quarter ending March 31, 2021.

The Second Amendment temporarily waives certain financial covenants. The consolidated fixed charge coverage ratio is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will revert to a minimum of 1.50x. The consolidated leverage ratio covenant is waived until the fiscal quarter ending March 31, 2021, at which point the covenant level will increase from 4.00x to 4.50x, stepping down to 4.25x in the second quarter of 2021 and 4.00x in the third fiscal quarter of 2021 and thereafter. In addition, the Second Amendment adds a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, ranging from $60 million to $70 million, commencing on the Effective Date to May 26, 2021.

Interest Rate Hedges

We have receive-variable, pay-fixed interest rate swaps to hedge a portion of the forecasted cash flows of our floating rate debt. We 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 25, 2020 is as follows:



Trade Date	Effective Date	Maturity Date	Notional Amount			Fixed Rate
			(In thousands)
March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		2.44	%
October 1, 2015	March 29, 2018	March 31, 2026	50,000			2.46	%
February 15, 2018	March 31, 2020	December 31, 2033	80,000		⁽¹⁾	3.19	%


(1)	The notional amounts of the swaps entered into on February 15, 2018 increase annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029.

As of March 25, 2020, the fair value of the interest rate swaps was a liability of $89.1 million, which is recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. See Note 13 for the amounts recorded in accumulated other comprehensive loss related to the interest rate swaps.