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Note N - Long-term Debt | 6 Months Ended
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Sep. 24, 2017
Notes to Financial Statements |
Debt Disclosure [Text Block] | NOTE N – LONG-TERM DEBT Long-term debt consists of the following (in thousands):
|  | September 24, |  |  | March 26, |
|  | 2017 |  |  | 2017 |
10.000% Senior secured notes due 2020 |  | $ | 135,000 |  |  | $ | 135,000 |
Less: unamortized debt issuance costs |  |  | (2,926 | ) |  |  | (3,525 | )
Long-term debt, net of issuance costs |  | $ | 132,074 |  |  | $ | 131,475 |
On March 10, 2015, the Company completed the issuance of $135,000,000 of 10.000% Senior Secured Notes due 2020 (“the 2020 Notes”) in a Rule 144A transaction. The 2020 Notes were issued pursuant to an indenture, dated March 10, 2015 ( the “Indenture”), by and among the Company, certain of its wholly-owned subsidiaries, as guarantors, and U.S. Bank National Association, a national banking association, as trustee and collateral trustee. The Company used the proceeds to pay a special cash dividend of approximately $116,100,000 (see Note M.1 ) with the remaining net proceeds for general corporate purposes, including working capital. Debt issuance costs of approximately $5,985,000 were incurred, which were being amortized into interest expense over the remaining 5 -year term of the 2020 Notes, or until redeemed. The 2020 Notes bear interest at 10.000% per annum, payable semi-annually on March 15 th and September 15 th . An interest payment of $6,750,000 was paid on September 14, 2017. The 2020 Notes have no scheduled principal amortization payments prior to its final maturity on March 10, 2020. On November 1, 2017, the Company completed the issuance of $150,000,000 of 6.625% Senior Secured Notes due 2025 (the "2025 Notes") in a private offering in accordance with Rule 144A under the Securities Act of 1933, as amended (the “Securities Act”) and outside the United States in accordance with Regulation S under the Securities Act. Nathan's intends to use the net proceeds of the 2025 Notes offering to satisfy and discharge the Indenture relating to the 2020 Notes and redeem the 2020 Notes (the "Redemption"), to pay a portion of a special $5.00 per share cash dividend to Nathan's stockholders of record and to use any remaining net proceeds for general corporate purposes, including working capital. Nathan's estimates that the redemption payment in connection with the Redemption will be approximately $144,000,000. Nathan's will also fund the majority of the special dividend through its existing cash. Nathan's has issued a notice of redemption with respect to the full aggregate principal amount of the 2020 Notes. The Redemption will occur on November 16, 2017. On November 1, 2017, the Board of Directors declared the special $5.00 per share cash dividend. The cash dividend is payable on January 4, 2018 to stockholders of record at the close of business on December 22, 2017 . The 2025 Notes will have no scheduled principal amortization payments prior to its final maturity on November 1, 2025. At the time of Redemption, the Company will incur expenses in connection with the refinancing, including a 5% call premium of $6,750,000 along with expensing the unamortized debt issuance costs of approximately, $2,725,000 associated with the 2020 Notes. The Company also expects to incur additional interest expense of approximately $562,500 from the closing of the 2025 Notes offering on November 1, 2017 until the Redemption on November 16, 2017. The 2025 Notes bear interest at 6.625% per annum, payable semi-annually on May 1st and November 1 st of each year, beginning on May 1, 2018. Semi-annual interest payments are expected to be $4,968,750. The Company expects to reduce its annual interest expense by approximately $3,562,500 per annum. The terms and conditions of the 2025 Notes are similar to the 2020 Notes as follows: There are no financial maintenance covenants associated with either the 2020 Notes or the 2025 Notes. As of September 24, 2017, Nathan’s was in compliance with all covenants associated with the 2020 Notes. The Indenture for both the 2020 Notes and the 2025 Notes contain certain covenants limiting the Company’s ability and the ability of its restricted subsidiaries (as defined in the (Indenture) to, subject to certain exceptions and qualifications: (i) incur additional indebtedness; (ii) pay dividends or make other distributions on, redeem or repurchase, capital stock; (iii) make investments or other restricted payments; (iv) create or incur certain liens; (v) incur restrictions on the payment of dividends or other distributions from its restricted subsidiaries; (vi) enter into certain transactions with affiliates; (vii) sell assets; or (viii) effect a consolidation or merger. Certain Restricted Payments which may be made or indebtedness incurred by Nathan’s or its Restricted Subsidiaries may require compliance with the following financial ratios: Fixed Charge Coverage Ratio : the ratio of the Consolidated Cash Flow to the Fixed Charges for the relevant period, currently set at 2.0 to 1.0 in the Indenture for both the 2020 Notes and the 2025 Notes. The Fixed Charge Coverage Ratio applies to determining whether additional Restricted Payments may be made, certain additional debt may be incurred and acquisitions may be made. Priority Secured Leverage Ratio : the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Priority Lien to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate; currently set at 0.40 to 1.00 in the Indenture for both the 2020 Notes and the 2025 Notes. Secured Leverage Ratio : the ratio of (a) Consolidated Net Debt outstanding as of such date that is secured by a Lien on any property of Nathan’s or any Guarantor to (b) Consolidated Cash Flow of Nathan’s for the Test Period then most recently ended, in each case with such pro forma adjustments as are appropriate. The Secured Leverage Ratio under the Indenture for both the 2020 Notes and the 2025 Notes is 3.75 to 1.00 and applies if Nathan’s wants to incur additional debt on the same terms as the 2020 Notes or 2025 Notes, as the case may be. The Indenture for the 2020 Notes and the 2025 Notes also contain customary events of default, including, among other things, failure to pay interest, failure to comply with agreements related to the Indenture, failure to pay at maturity or acceleration of other indebtedness, failure to pay certain judgments, and certain events of insolvency or bankruptcy. Generally, if any event of default occurs, the Trustee or the holders of at least 25% in principal amount of the 2020 Notes or the 2025 Notes may declare the respective Notes due and payable by providing notice to the Company. In case of default arising from certain events of bankruptcy or insolvency, the 2020 Notes or 2025 Notes, as the case may be will become immediately due and payable. The 2025 Notes are general senior secured obligations, are fully and unconditionally guaranteed by substantially all of the Company’s wholly-owned subsidiaries and rank pari passu in right of payment with all of the Company’s existing and future indebtedness that is not subordinated, are senior in right of payment to any of the Company’s existing and future subordinated indebtedness, are structurally subordinated to any existing and future indebtedness and other liabilities of the Company’s subsidiaries that do not guarantee the 2025 Notes, and are effectively junior to all existing and future indebtedness that is secured by assets other than the collateral securing the 2025 Notes. Pursuant to the terms of a collateral trust agreement, the liens securing the 2025 Notes and the guarantees will be contractually subordinated to the liens securing any future credit facility. The 2025 Notes and the guarantees will be the Company and the guarantors’ senior secured obligations and will rank:
| ● | senior in right of payment to all of the Company and the guarantors ’ future subordinated indebtedness;
| ● | effectively senior to all unsecured senior indebtedness to the extent of the value of the collateral securing the Notes and the guarantees;
| ● | pari passu with all of the Company and the guarantors’ other senior indebtedness;
| ● | effectively junior to any future credit facility to the extent of the value of the collateral securing any future credit facility and the Notes and the guarantees and certain other assets;
| ● | effectively junior to any of the Company and the guarantors ’ existing and future indebtedness that is secured by assets other than the collateral securing the Notes and the guarantees to the extent of the value of any such assets; and
| ● | structurally subordinated to the indebtedness of any of the Company ’s current and future subsidiaries that do not guarantee the Notes.
The Company may redeem the 2025 Notes in whole or in part prior to November 1, 2020, at a redemption price of 100% of the principal amount of the 2025 Notes redeemed plus the Applicable Premium as of, plus accrued and unpaid interest. An Applicable Premium is the greater of 1% of the principal amount of the 2025 Notes; or the excess of the present value at such redemption date of (i) the redemption price of the 2025 Notes at November 1, 2020 plus (ii) all required interest payments due on the Notes through November 1, 2020 ( excluding accrued but unpaid interest to the redemption date), computed using a discount rate equal to the Treasury Rate as of such redemption date plus 50 basis points; over the then outstanding principal amount of the Notes. Prior to November 1, 2020, if using the net cash proceeds of certain equity offerings, the Company has the option to redeem up to 35% of the aggregate principal amount of the 2025 Notes at a redemption price equal to 106.625% of the principal amount of the 2025 Notes redeemed, plus accrued and unpaid interest and any additional interest. On or after November 1, 2020, the Company may redeem some or all of the 2025 Notes at a decreasing premium over time, plus accrued and unpaid interest as follows:
YEAR |  | PERCENTAGE |
On or after November 1, 2020 and prior to November 1, 2021 |  |  | 103.313 | %
On or after November 1, 2021 and prior to November 1, 2022 |  |  | 101.656 | %
On or after November 1, 2022 |  |  | 100.000 | %
In certain circumstances involving a change of control, the Company will be required to make an offer to repurchase all or, at the holder ’s option, any part, of each holder’s 2025 Notes pursuant to the offer described below (the “Change of Control Offer”). In the Change of Control Offer, the Company will be required to offer payment in cash equal to 101% of the aggregate principal amount of 2025 Notes repurchased plus accrued and unpaid interest, to the date of purchase. If the Company sells certain assets and does not use the net proceeds as required, the Company will be required to use such net proceeds to repurchase the 2025 Notes at 100% of the principal amount thereof, plus accrued and unpaid interest and additional interest penalty, if any, to the date of repurchase. The 2025 Notes may be traded between qualified institutional buyers pursuant to Rule 144A of the Securities Act of 1933. We expect to record the 2025 Notes at cost. There are no SEC registration requirements for the 2025 Notes.

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- Definition The entire disclosure for information about short-term and long-term debt arrangements, which includes amounts of borrowings under each line of credit, note payable, commercial paper issue, bonds indenture, debenture issue, own-share lending arrangements and any other contractual agreement to repay funds, and about the underlying arrangements, rationale for a classification as long-term, including repayment terms, interest rates, collateral provided, restrictions on use of assets and activities, whether or not in compliance with debt covenants, and other matters important to users of the financial statements, such as the effects of refinancing and noncompliance with debt covenants. + References Reference 1: http://www.xbrl.org/2003/role/presentationRef -Publisher FASB -Name Accounting Standards Codification -Topic 470 -URI http://asc.fasb.org/topic&trid=2208564 + Details
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