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Wendy's Refinances Credit Facility

Sanghamitra Saha

The Wendy's Company (WEN) recently announced that its indirect wholly-owned subsidiary, Wendy's International, Inc. has entered into an agreement to refinance its existing credit facility of approximately $1,119 million. The deal is slated to close on May 16, 2013.

The new credit refinances $350 million of the approximately $1,119 million senior secured Term Loan B into a new senior secured Term Loan A. It is scheduled to expire in May 2018, one year earlier than the Term Loan B.
The initiative will also extend the maturity period of the $200 million revolving credit facility by one year and reduce interest on the remaining Term Loan B balance of approximately $769 million. Hence, the twin effect of paying down the company’s high-cost debt and extension of maturity period will strengthen the company’s financial position.

Overall, this refinancing is expected to generate more than $19 million in ongoing annual interest expense savings along with $30 million of savings in ongoing annual net interest expense from its 2012 refinancing. The two refinancings will reduce annual net interest expense by around $50 million compared to two years ago.

The company remains committed to strengthening its balance sheet. At the end of the fourth-quarter 2012, net debt multiple of Wendy’s was 3.0 times based on trailing 12-month adjusted EBITDA, lower than 3.2 times at the end of third-quarter 2012.

Wendy’s currently retains a Zacks Rank #3 (Hold). Some other restaurant industry stocks with a favorable Zacks Rank include Red Robin Gourmet Burgers Inc. (RRGB), Burger King Worldwide Inc. (BKW) and Cracker Barrel Old Country Store Inc. (CBRL). While Red Robin and Cracker Barrel retain a Zacks Rank #1 (Strong Buy), Burger King carries a Zacks Rank #2 (Buy).

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