Long-Term Debt

3 Months Ended

Mar. 31, 2021

Denny's and certain of its subsidiaries have a credit facility consisting of a five-year $375 million senior secured revolver (with a $30 million letter of credit sublimit). As of March 31, 2021, we had outstanding revolver loans of $215.0 million and outstanding letters of credit under the credit facility of $17.3 million. These balances resulted in availability of $142.7 million under the credit facility prior to considering the liquidity covenant in our credit facility. Factoring in the liquidity covenant, our availability was $87.2 million. 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).

As of March 31, 2021, borrowings under the credit facility bore interest at a rate of LIBOR plus 3.00% and the commitment fee, paid on the unused portion of the credit facility, was set to 0.40%. The maturity date for the credit facility is October 26, 2022.

Due to our credit facility amendment in December 2020, the total credit facility commitment will be reduced to $350 million on July 1, 2021. The Company continues to have supplemental monthly reporting obligations to its lenders and is prohibited from paying dividends and making stock repurchases and other general investments. Existing restrictions on capital expenditures of $10 million in the aggregate were in effect starting on May 13, 2020 through March 31, 2021, at which point the restrictions expanded to $12 million in the aggregate through September 29, 2021.

The consolidated fixed charge coverage ratio covenant was waived through March 31, 2021, at which point the covenant level becomes a minimum of 1.00x for the quarter ending June 30, 2021, adjusting to 1.25x for the quarter ending September 29, 2021, and 1.50x for the quarter ending December 29, 2021 and thereafter. The consolidated leverage ratio covenant was waived through March 31, 2021, at which point the covenant level becomes a maximum of 5.25x as of June 30, 2021, stepping down to

4.75x as of September 29, 2021, and 4.00x as of December 29, 2021 and thereafter. In addition, the Company is subject to a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, of $70 million, until the date of delivery of the financial statements for the fiscal quarter ending September 29, 2021. We were in compliance with all financial covenants as of March 31, 2021.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.11% and 3.15% as of March 31, 2021 and December 30, 2020, 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 4.96% and 5.01% as of March 31, 2021 and December 30, 2020, 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 31, 2021 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		$	8,255	2.44	%
October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	3,701	2.46	%
Dedesignated swaps
February 15, 2018	March 31, 2020	December 31, 2033	$	100,000	(1)	$	29,633	3.19	%
Total			$	270,000		$	41,589

(1) The notional amounts of the swaps entered into on February 15, 2018 increase annually 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 (loss). 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 31, 2021, the fair value of swaps designated as cash flow hedges was $12.0 million and was recorded as a component of other noncurrent liabilities with an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive income, net in our Condensed Consolidated Balance Sheets. See Note 13 for amounts recorded in accumulated other comprehensive loss related to interest rate swaps. We expect to reclassify approximately $4.0 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 12 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 expense (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 31, 2021, we reclassified unrealized losses of approximately $0.1 million to interest expense, net related to the 2018 Swaps. At March 31, 2021, approximately $64.2 million (before taxes) of unrealized losses remained in accumulated other comprehensive loss, net.

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 expense (income), net in our Consolidated Statements of Operations. For the quarter ended March 31, 2021, we recorded income of approximately $29.9 million as a component of nonoperating expense (income) related to the 2018 Swaps resulting from changes in fair value. As of March 31, 2021, the fair value of the dedesignated interest rate swaps was $29.6 million and was recorded as a component of other noncurrent liabilities in our Condensed Consolidated Balance Sheets. 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 12 months.