Long-Term Debt

12 Months Ended

Dec. 30, 2020

Long-term debt consisted of the following:


	December 30, 2020		December 25, 2019
	(In thousands)
Revolving loans	$	210,000	$	240,000
Finance lease obligations	15,369		16,453
Total long-term debt	225,369		256,453
Less current maturities	1,839		1,674
Noncurrent portion of long-term debt	$	223,530	$	254,779

There are no scheduled maturities of our revolving loans due in 2021. The $210.0 million of revolving loans are due October 26, 2022.

Denny’s Corporation and certain of its subsidiaries have a credit facility consisting of a five-year $375 million senior secured revolver (with a $30 million letter of credit sublimit). As of December 30, 2020, we had outstanding revolver loans of $210.0 million and outstanding letters of credit under the senior secured revolver of $17.3 million. These balances resulted in availability of $147.7 million under the credit facility prior to considering the liquidity covenant in our credit facility. Factoring in the liquidity covenant, our availability was $81.6 million. The credit facility is available for working capital, capital expenditures and other general corporate purposes. The credit facility is guaranteed by Denny's and its material subsidiaries and is secured by assets of Denny's and its subsidiaries, including the stock of its subsidiaries (other than our insurance captive subsidiary). During the year, we executed two amendments to our credit agreement, which modified the agreement as described below.

On May 13, 2020, we entered into an amendment (the "Second Amendment") to our credit agreement. As a result of the Second

Amendment, beginning May 13, 2020 until the date of delivery of our financial statements for the fiscal quarter ending June 30,

2021, the interest rate of the amended credit agreement was increased to LIBOR plus 3.00% and the commitment fee, paid on the unused portion of the credit facility, was increased to 0.40%. During this period, we have supplemental monthly reporting obligations to our lenders and we are prohibited from paying dividends and making stock repurchases and other general investments. Additionally, capital expenditures were to be restricted to $10 million in the aggregate from May 13, 2020 through the fiscal quarter ending March 31, 2021.

The Second Amendment temporarily waived certain financial covenants. The consolidated fixed charge coverage ratio was

waived until the fiscal quarter ending March 31, 2021, at which point the covenant level was to revert to a minimum of 1.50x. The consolidated leverage ratio covenant was waived until the fiscal quarter ending March 31, 2021, at which point the covenant level was to increase from 4.00x to 4.50x, stepping down to 4.25x in the second quarter of 2021 and 4.00x in the third fiscal quarter of 2021 and thereafter. In addition, the Second Amendment added a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, ranging from $60 million to $70 million, commencing on May 13, 2020 to May 26, 2021.

On December 15, 2020, we executed an additional amendment (the “Third Amendment”) to our credit agreement. Commencing with the effective date of the Third Amendment until the date of delivery of the financial statements for the fiscal quarter ending December 29, 2021, the interest rate shall remain LIBOR plus 3.00%. As of the effective date of the Third Amendment, the accordion feature was removed, and the total credit facility commitment was reduced from $400 million to $375 million and will be reduced to $350 million on July 1, 2021. As a result of the decrease in borrowing capacity, we wrote off $0.2 million of deferred financing costs as a component of other nonoperating (income) expense, net in the Consolidated Statements of Operations. Commencing with the effective date of the Third Amendment until the date of delivery of the financial statements for the fiscal quarter ending September 29, 2021, the Company will continue to have supplemental monthly reporting obligations to its lenders and will be prohibited from paying dividends and making stock repurchases and other general investments. Additionally, existing restrictions on capital expenditures of $10 million in the aggregate will remain in effect through March 31, 2021, at which point the restrictions will expand to $12 million in the aggregate through September 29, 2021.

The Third Amendment temporarily waives certain financial covenants. The consolidated fixed charge coverage ratio covenant is waived through March 31, 2021, at which point the covenant level will be a minimum of 1.00x, adjusting to 1.25x on July 1, 2021, and 1.50x on September 30, 2021 and thereafter. The consolidated leverage ratio covenant is waived through March 31, 2021, at which point the covenant level will be a maximum of 5.25x, stepping down to 4.75x on July 1, 2021, and 4.00x on September 30, 2021 and thereafter. In addition, the Third Amendment maintains a monthly minimum liquidity covenant, defined as the sum of unrestricted cash and revolver availability, of $70 million, commencing on the effective date until the date of delivery of the financial statements for the fiscal quarter ending September 29, 2021. We were in compliance with all financial covenants as of December 30, 2020.

Prior to considering the impact of our interest rate swaps, described below, the weighted-average interest rate on outstanding revolver loans was 3.15% and 3.47% as of December 30, 2020 and December 25, 2019, respectively. Taking into consideration our interest rate swaps that are designated as cash flow hedges, the weighted-average interest rate of outstanding revolver loans was 5.01% and 3.99% as of December 30, 2020 and December 25, 2019, respectively.

Interest Rate Hedges

We have receive-variable, pay-fixed interest rate swaps to hedge the forecasted cash flows of our floating rate debt. We initially

designated the interest rate swaps as cash flow hedges of our exposure to variability in future cash flows attributable to variable

interest payments due on forecasted notional amounts. A summary of our interest rate swaps as of December 30, 2020 is as follows:


Trade Date	Effective Date	Maturity Date	Notional Amount			Fair Value		Fixed Rate
			(In thousands)
Swaps designated as cash flow hedges
March 20, 2015	March 29, 2018	March 31, 2025	$	120,000		$	10,698	2.44	%
October 1, 2015	March 29, 2018	March 31, 2026	$	50,000		$	5,232	2.46	%
Dedesignated swaps
February 15, 2018	March 31, 2020	December 31, 2033	$	100,000	(1)	$	60,515	3.19	%
Total			$	270,000		$	76,445

(1) The notional amount of the swaps entered into on February 15, 2018 increases annually beginning September 30, 2020 until they reach the maximum notional amount of $425.0 million on September 28, 2029.

Swaps Designated as Cash Flow Hedges

To the extent the swaps are highly effective in offsetting the variability of the hedged cash flows, changes in the fair value of the swaps are not included in the Consolidated Statements of Operations but are reported as a component of accumulated other comprehensive loss, net. The interest rate swaps entered into in 2015 are designated as cash flow hedges with unrealized gain and losses recorded as a component of accumulated other comprehensive loss, net.

As of December 30, 2020, the fair value of swaps designated as cash flow hedges was $15.9 million and was recorded as a component of other noncurrent liabilities with an offsetting amount (before taxes) recorded as a component of accumulated other comprehensive loss, net in our Consolidated Balance Sheets. See Note 18 for the amounts recorded in accumulated other comprehensive loss related to the interest rate swaps. We expect to reclassify approximately $3.9 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to swaps designated as cash flow hedges during the next twelve months.

Dedesignated Interest Rate Hedges

During the quarter ended June 24, 2020, we determined that a portion of the underlying cash flows related to our hedging relationship entered into in 2018 (“2018 Swaps”) were no longer probable of occurring over the term of the interest rate swaps as a result of the ongoing impacts of the COVID-19 pandemic and using proceeds from our share offering described in Note 18 to repay a portion of our long-term debt. Accordingly, during the quarter ended June 24, 2020, we dedesignated the cash flow relationship and discontinued hedge accounting treatment for the 2018 Swaps. As a result, we reclassified approximately $7.4 million of losses from accumulated other comprehensive loss, net to other nonoperating expense (income), net in our Consolidated Statements of Operations for the year ended December 30, 2020 related to the portion of the forecasted transaction no longer considered probable of occurring. The determination of the amount reclassified was based on credit default curve and recovery rate assumptions applied to forecasted balances of variable rate debt.

The remaining amounts of unrealized losses related to the 2018 Swaps are included in accumulated other comprehensive loss, net and are amortized into the Consolidated Statements of Operations as a component of interest expense, net over the remaining term of the 2018 Swaps. For the year ended December 30, 2020, we reclassified unrealized losses of approximately $0.8 million to interest expense, net related to the 2018 Swaps. At December 30, 2020, approximately $64.4 million (before taxes) of unrealized losses remained in accumulated other comprehensive loss, net.

As a result of the dedesignated cash flow relationship related to the 2018 Swaps, changes in the fair value of the 2018 Swaps are recorded as a component of other nonoperating expense (income), net in our Consolidated Statements of Operations. For the year ended December 30, 2020, we recorded income of approximately $10.3 million as a component of nonoperating expense (income) related to the 2018 Swaps resulting from changes in fair value.

As of December 30, 2020, the fair value of the dedesignated interest rate swaps was $60.5 million, $0.3 million of which was recorded as a component of other current liabilities and $60.2 million of which was recorded as a component of other noncurrent liabilities in our Consolidated Balance Sheets. We expect to amortize approximately $0.2 million from accumulated other comprehensive loss, net to interest expense, net in our Consolidated Statements of Operations related to dedesignated interest rate swaps during the next twelve months.