Jack in the Box Inc. (JACK), a restaurant company, announced recently the completion of a five-year, new $600 million senior credit facility, which includes a revolving credit facility of $400 million and a term loan of $200 million, both maturing in 2015.
Jack in the Box refinanced the new credit facility through Wells Fargo Securities, LLC, a part of Wells Fargo & Company (WFC), Banc of America Securities LLC, a part of Bank of America Corporation (BAC) and Morgan Stanley Senior Funding, Inc, a part of Morgan Stanley (MS).
The new credit facility will replace the existing bank debt including a $150 million revolver expiring in December 2011 and a $370 million term loan expiring in December 2012. Jack in the Box will have to pay deferred financing fees of $2.3 million in the third quarter of 2010 due to early extinguishment of debt.
The interest rate on the new facility ranges from LIBOR plus 2.25% to 2.75% with the initial interest rate being LIBOR plus 2.50%.
Jack in the Box believes that the new credit facility will strengthen its financial position to support its strategic initiatives, which includes expansion.
We expect the combination of financial instruments to strengthen the company’s balance sheet, extend the maturity periods of debt and improve credit ratios. The long-term debt of the company as of Apr 11, 2010 was $348.4 million, down from $357.3 million as of Sep 27, 2009. Though the new facility would enhance the amount of borrowings available to the company, the indebtedness increases the company’s vulnerability and interest risk exposure.
Based in San Diego, Jack in the Box is a restaurant company, over 50 years old and now operates in over 2,100 locations. The company operates and franchises Jack in the Box quick-service restaurants and Qdoba Mexican Grill (“Qdoba”) fast-casual restaurants in 45 states.
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