DineEquity completes $1.4B refinancingDineEquity completes $1.4B refinancing

DineEquity Inc. has completed a $1.4 billion refinancing of debt to take advantage of lower interest rates, the company said Tuesday.

The Glendale, Calif.-based parent to Applebee’s and IHOP said its subsidiaries have issued and sold $1.3 billion of their series 2014-1, Class A-2 fixed rate senior secured notes at an interest rate of 4.277 percent per year, payable quarterly, and will have an expected term of seven years.

The notes were issued in a privately placed securitization transaction. Cash flows generated by Applebee’s and IHOP’s domestic franchising, rental and financing assets will be used to make payments.

DineEquity’s subsidiaries also entered into a purchase agreement for the issuance of up to $100 million series 2014-1 variable funding senior notes, class A-1, which will allow them to borrow amounts from time to time on a revolving basis and issue letters of credit, the company said.

Proceeds from the sale of the notes will be used to refinance about $761 million in outstanding principal on its 9.5 percent senior notes on or around Oct. 30 this year, and the entire outstanding balance of about $464 million of its senior secured credit facility, which was repaid at the closing.

The remaining proceeds will be primarily used for transaction costs associated with the refinancing and general corporate purposes, DineEquity said. The company’s most recent significant refinancing was in 2010.

“We are very pleased to have successfully completed the securitization at an attractive fixed interest rate. The new debt structure provides for increased financial flexibility and leverages our ability to consistently generate strong, stable free cash flow,” DineEquity chair and chief executive Julia Stewart said in a statement Wednesday.

DineEquity’s heavy debt load stems from the $2.1 billion acquisition of Applebee’s International Inc. by IHOP Corp. in 2007.

The combined company was dubbed DineEquity. Over the following five years, the company transformed Applebee’s into a nearly fully franchised and asset-light chain, using proceeds from the refranchising of about 500 restaurants toward paying off debt.

By early 2014, the company had reduced its debt by about $1 billion.

DineEquity operates and franchises more than 3,600 restaurants under the Applebee’s Neighborhood Grill & Bar and IHOP brands in 19 countries.

Contact Lisa Jennings at [email protected].
Follow her on Twitter: @livetodineout