Wendy’s/Arby’s Group, Inc. (WEN), the third largest quick-service restaurant company in the U.S., recently announced that it has completed a new $650 million senior secured credit facility, which includes a $150 million revolving credit facility maturing in 2015, and a $500 million term loan maturing in 2017.
Wendy’s/Arby’s expects to use the proceeds from the new term loan to repay the debt under its existing term loan and 6.25% senior notes due 2011. The new facility is also anticipated to reduce annual interest expense over the next 12 months.
The latest capital raising initiative is not improving the liquidity position of Wendy’s/Arby’s given that the company is repaying its previous debt liability through one credit facility. The benefit with the new credit facility is that it is providing the company with more number of years to pay back the loan and is also reducing the interest burden of the company.
Wendy’s/Arby’s cash position showed a balance of $507.3 million and long-term debt was $1.5 billion as of Apr 4, 2010. The company’s closest peer, Chipotle Mexican Grill Inc. (CMG), is in a relatively better position with cash and cash equivalents of $193.0 million, and no long-term debt as of Mar 31, 2010.
Wendy’s/Arby’s is one of the leading quick-service restaurant companies in the U.S. The company was formed through the merger of Triarc, the franchisor of the Arby’s restaurant chain, and Wendy’s, the owner-operator-franchisor of the eponymous fast food chain.
Wendy’s and Arby’s continue to operate independently, with Wendy’s headquartered in Dublin, Ohio, and Arby’s in Atlanta, Georgia. The combined restaurant systems include more than 10,000 restaurants in the U.S. and 24 other countries as well as territories worldwide. We maintain a Zacks #3 Rank on Wendy’s/Arby’s, which translates into a short-term Neutral recommendation
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