Yum! Brands, Inc. Completes Refinancing of Senior Secured Credit Facilities

Rhea-AI Summary

Yum! Brands announced the refinancing of approximately $3.4 billion in existing loan facilities. The new financing includes a $1.5 billion term loan B, a $750 million term loan A, and a $1.25 billion revolving credit facility. The new loans carry varying interest rates based on LIBOR or base rates, with spreads of 1.00%-1.75%. The amendment eases certain restrictions and introduces a financial maintenance covenant with a leverage ratio not exceeding 5.00:1.00, adjustable under specific circumstances. Proceeds will repay existing loans and cover transaction costs.

Positive

• Successful refinancing of approximately $3.4 billion in loan facilities enhances liquidity.
• Eased restrictions and increased limits on certain covenants may provide greater financial flexibility.
• Proceeds from new loans will strengthen balance sheet by repaying existing debt.

Negative

• The inclusion of a leverage ratio covenant may restrict financial operations under certain conditions.

Yum! Brands, Inc. (NYSE: YUM) (the “Company”) today announced that certain subsidiaries that operate the Company’s KFC, Pizza Hut and Taco Bell businesses have completed the refinancing of the existing approximately $1.9 billion term loan B facility, approximately $431 million term loan A facility and approximately $1.0 billion revolving facility (the “Existing Facilities”) through the issuance of a $1.5 billion term loan B maturing March 15, 2028 (the “Term B Loan”), a $750 million term loan A maturing March 15, 2026 (the “Term A Loan”) and a $1.25 billion revolving credit facility maturing March 15, 2026 (the “Revolving Facility”) pursuant to an amendment to the underlying credit agreement (the “Amendment”).

The interest rates applicable to the Term A Loan and to borrowings under the Revolving Facility will be based on either LIBOR or the base rate, as determined by the borrowers, plus a spread based on the borrowers’ total leverage ratio. Such spread is initially 1.00% for LIBOR loans and 0.00% for base rate loans and ranges between 0.75% and 1.50% for LIBOR loans and between 0.00% and 0.50% for base rate loans based on the total leverage ratio. Borrowings under the Term B Loan accrue interest at an annual rate of either LIBOR or the base rate, plus a spread of 1.75% for LIBOR loans and 0.75% for base rate loans. The “base rate” means the greatest of (a) the Prime Rate then in effect, (b) the federal funds rate then in effect plus 0.5% and (c) the rate for one month LIBOR rate then in effect plus 1.0%. The Term A Loan will amortize at 2.5% per annum during the second and third years following closing and at 5.0% per annum during the fourth and fifth years following closing. The Term B Loan will amortize at 1.0% per year, and is subject to a 6-month 1.00% soft call provision. The Amendment eases certain requirements with respect to mandatory prepayments, and includes an increase to the limit of, and certain other revisions in connection with, incremental credit extensions. The Amendment also eases certain requirements and restrictions, and increases certain baskets for, certain negative covenants, including the investment, indebtedness and restricted payment covenants, and includes a single financial maintenance covenant requiring a total leverage ratio not to exceed 5.00:1.00, which maximum level increases to 5.50:1.00 in certain circumstances following material acquisitions. Further, the Amendment builds in a hardwired approach for the replacement of LIBOR, as well as QFC provisions and revisions to bail-in provisions. All other material provisions of the underlying credit agreement remain unchanged.

Net proceeds from the issuance will be used to repay the Existing Facilities, to pay associated transaction fees and expenses, and for general corporate purposes.

Yum! Brands, Inc., based in Louisville, Kentucky, has over 50,000 restaurants in more than 150 countries and territories primarily operating the Company’s KFC, Pizza Hut, and Taco Bell brands – global leaders of the chicken, pizza, and Mexican-style food categories. The Company’s family of brands also includes The Habit Burger Grill, a fast-casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. Yum! Brands was included on the 2021 Bloomberg Gender-Index and in 2020, Yum! Brands was named to the Dow Jones Sustainability Index North America and was ranked among the top 100 Best Corporate Citizens by 3BL Media.

Category: Financial

View source version on businesswire.com: https://www.businesswire.com/news/home/20210315005778/en/

FAQ

What is Yum! Brands' recent loan refinancing announcement?

Yum! Brands announced the refinancing of approximately $3.4 billion in existing loan facilities through new term loans and a revolving credit facility.

What are the terms of the new loans for Yum! Brands?

The new loans include a $1.5 billion term loan B, a $750 million term loan A, and a $1.25 billion revolving credit facility, with interest rates based on LIBOR or base rates.

What will the proceeds from Yum! Brands' refinancing be used for?

The proceeds will be used to repay existing loan facilities and cover transaction fees and expenses.

How does Yum! Brands' loan amendment affect its financial covenants?

The amendment introduces a new financial maintenance covenant requiring a total leverage ratio not to exceed 5.00:1.00, which can increase under certain conditions.

What impact does Yum! Brands' refinancing have on its liquidity?

The refinancing enhances Yum! Brands' liquidity by replacing existing debt with new financing options and easing previous restrictions.