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

Rhea-AI Summary

Yum! Brands, Inc. successfully completed the refinancing of its Senior Secured Credit Facilities, totaling approximately $2.00 billion, with the issuance of a $500 million Term A Loan and a $1.50 billion Revolving Facility. The refinancing did not add any additional net new debt to the balance sheet. The Term A Loan and Revolving Facility will mature on or before April 26, 2029, and the interest rates remain unchanged from the Existing Facilities. The proceeds from the issuance will be used to repay the Existing Facilities, pay associated transaction fees and expenses, and for general corporate purposes. Yum! Brands, Inc. is a global leader in the restaurant industry, operating over 59,000 restaurants in more than 155 countries and territories under popular brands like KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill.

Positive

• Successful completion of the refinancing of Senior Secured Credit Facilities totaling $2.00 billion
• Issuance of a $500 million Term A Loan and a $1.50 billion Revolving Facility
• No additional net new debt added to the balance sheet
• Term A Loan and Revolving Facility to mature on or before April 26, 2029
• Interest rates remain unchanged from the Existing Facilities
• Proceeds to be used for repayment of Existing Facilities, transaction fees, and general corporate purposes
• Yum! Brands, Inc. operates over 59,000 restaurants in more than 155 countries and territories
• Popular brands include KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill

Negative

• None.

Insights

Financial Analyst

Yum! Brands' strategic refinancing activity is an indicator of prudent financial management, particularly in the context of their impressive global footprint of over 59,000 restaurants. By reducing the term loan A facility and increasing the revolving credit facility, they have enhanced financial flexibility. The unchanged interest rates on the new Term A Loan and Revolving Facility, coupled with a detailed spread based on leverage ratio, suggest a stable credit profile for the company. The amortization schedule indicates a thoughtful approach to debt management. Investors should note the absence of additional net new debt, which means the company is not increasing its leverage, but rather optimizing its capital structure. Proceeds designated for repayment of existing obligations and general corporate purposes can be seen as a non-dilutive way to maintain liquidity, which may be attractive for shareholders.

Debt Market Analyst

The refinancing terms, particularly the duration until 2029 and the conditions on term loan B and senior notes, reflect a long-term strategy to manage debt responsibly. A critical aspect for investors is the leverage ratio's influence on interest rates—lower leverage ratios can lead to more favorable borrowing costs. The mix of base rate and Adjusted Term SOFR as benchmarks for the interest rates is a standard practice post-LIBOR era, providing clarity on the cost of capital. Yum! Brands' ability to negotiate these terms could imply a strong negotiating position and creditworthiness in the eyes of lenders. For investors, understanding the implications of SOFR and how it affects interest payments is key to assessing the potential impact on Yum! Brands' financials.

Market Research Analyst

The completion of refinancing reflects positively on Yum! Brands' operational efficiency and foresight in corporate finance. Investors should consider how these actions might support Yum!'s ongoing business initiatives, such as expansion in the international market and investment in their brands like KFC, Taco Bell and Pizza Hut. The consistent inclusion in indices and rankings signals a broader commitment to corporate responsibility and leadership development, which may enhance brand reputation and customer loyalty, indirectly benefiting long-term stock performance. These factors, while not directly financial, feed into the holistic assessment of the company's strategic positioning and should be weighed by investors when considering the impact of financial maneuvers on overall corporate health.

LOUISVILLE, Ky.--(BUSINESS WIRE)-- 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 $713 million term loan A facility and $1.25 billion revolving facility (the “Existing Facilities”) through the issuance of a $500 million term loan A (the “Term A Loan”) and a $1.50 billion revolving credit facility (the “Revolving Facility”) pursuant to an amendment to the underlying credit agreement (the “Amendment”). The Term A Loan and the Revolving Facility will mature on the earliest of (i) April 26, 2029, (ii) the date that is 91 days prior to the maturity of the borrowers’ existing term loan B if more than $250 million of such term loan B remains outstanding as of such date and (iii) the date that is 91 days prior to the maturity of the borrowers’ existing senior notes if more than $250 million of such senior notes remains outstanding as of such date. The total size of the bank credit facility (excluding the borrowers’ existing $1.46 billion term loan B) remains ~$2.00 billion and the transaction does not add any additional net new debt to the balance sheet.

The interest rates applicable to the Term A Loan and to borrowings under the Revolving Facility have not changed from the Existing Facilities. The interest rates will be based on either Adjusted Term SOFR or the base rate, as determined by the borrowers, plus a spread based on the borrowers’ total leverage ratio. Adjusted Term SOFR refers to one month term SOFR plus 0.11448%, three month term SOFR plus 0.26161% or six month term SOFR plus 0.42826%, as selected by the borrowers. Such spread based on the borrowers’ total leverage ratio is initially 0.75% for Adjusted Term SOFR loans and 0.00% for base rate loans and ranges between 0.75% and 1.50% for Adjusted Term SOFR loans and between 0.00% and 0.50% for base rate loans based on the total leverage ratio. 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 Adjusted Term SOFR 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.

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

Yum! Brands, Inc., based in Louisville, Kentucky, and its subsidiaries franchise or operate a system of over 59,000 restaurants in more than 155 countries and territories under the company’s concepts – KFC, Taco Bell, Pizza Hut and the Habit Burger Grill. The Company's KFC, Taco Bell and Pizza Hut brands are global leaders of the chicken, Mexican-style food, and pizza categories, respectively. The Habit Burger Grill is a fast casual restaurant concept specializing in made-to-order chargrilled burgers, sandwiches and more. In 2024, Yum! was named to the Dow Jones Sustainability Index North America for the eighth consecutive year, and the company was recognized among TIME Magazine’s list of Best Companies for Future Leaders and Newsweek’s list of America’s Most Responsible Companies. Yum! also received widespread recognition in 2023, including being listed on the Bloomberg Gender-Equality Index; Forbes’ list of America’s Best Employers for Diversity; and Newsweek’s list of America’s Greenest Companies. In addition, KFC, Taco Bell and Pizza Hut brands were ranked in the top five of Entrepreneur’s Top Global Franchises Ranking for 2023.

Category: Financial

View source version on businesswire.com: https://www.businesswire.com/news/home/20240426945891/en/

Analysts are invited to contact:

Matt Morris, Head of Investor Relations, at 888/298-6986

Members of the media are invited to contact:

Virginia Ferguson, Vice President, Public Relations, at 502/874-8200

Source: Yum! Brands, Inc.

FAQ

What did Yum! Brands, Inc. announce regarding its Senior Secured Credit Facilities?

Yum! Brands, Inc. announced the completion of refinancing its Senior Secured Credit Facilities with the issuance of a $500 million Term A Loan and a $1.50 billion Revolving Facility.

What is the total size of the bank credit facility after the refinancing?

The total size of the bank credit facility (excluding the borrowers' existing $1.46 billion term loan B) remains approximately $2.00 billion.

When will the Term A Loan and Revolving Facility mature?

The Term A Loan and Revolving Facility will mature on or before April 26, 2029.

What will the proceeds from the issuance be used for?

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

How many restaurants does Yum! Brands, Inc. operate globally?

Yum! Brands, Inc. operates over 59,000 restaurants in more than 155 countries and territories.

What are some of the popular brands operated by Yum! Brands, Inc.?

Yum! Brands, Inc. operates popular brands like KFC, Taco Bell, Pizza Hut, and The Habit Burger Grill.