Denny's Obtains Credit Facility - Analyst Blog

Denny’s Corporation (DENN), America’s largest full-service family restaurant chain, recently announced that it has got a $300 million credit facility, which includes a $50 million revolving credit and $250 million term loan maturing in 2015 and 2016, respectively. This alters its existing credit facility.

The term loan will bear an interest rate of LIBOR plus 475 basis points, with a LIBOR floor of 1.75% and will mature in six years.

The company plans to use a portion of the term loan proceeds to finance a simultaneously announced cash tender offer to repurchase or redeem $175 million of its outstanding 10% senior notes due 2012.

The company believes that the new credit facility will strengthen its financial position and offer investment opportunities to further enhance its market share. Moreover, it extends the maturity periods of the debt.

The long-term debt excluding capital lease obligations of the company as of June 30, 2010 was $240.2 million, down from $259.2 million at December 30, 2009. Though the new facility would enhance the amount of borrowings available to the company, the indebtedness increases Denny’s vulnerability and interest risk exposure.

Denny’s currently retains a Zacks #4 Rank, which translates into a short-term Sell rating.

Denny’s primary competitors are Biglari Holdings Inc. (BH), AFC Enterprises Inc. (AFCE) and Krispy Kreme Doughnut Inc. (KKD).

Founded in 1980, Spartanburg, South Carolina-based Denny’s is a family restaurant company, primarily operating in the United States. As of June 30, 2010, Denny’s operated 1,556 restaurants, including 1,328 franchised/licensed restaurants and 233 company-owned and operated restaurants.