Krispy Kreme Doughnuts, Inc. (NYSE: KKD) announced today that its principal operating subsidiary, Krispy Kreme Doughnut Corporation, has closed a new secured credit facility aggregating $60 million, comprised of a $25 million revolving credit facility and a $35 million term loan. The term loan amortizes in quarterly installments of $583,333 beginning on March 31, 2011, with a final payment of the remaining term loan balance due at the maturity of the new facility in January 2016. The new facility may be retired without penalty at any time.
Proceeds of the term loan were used to repay the approximately $35 million outstanding balance under the Company’s prior credit facility, which has been terminated. The revolving credit facility is intended to be used to support outstanding letters of credit, which currently total approximately $12.5 million, with the balance available for working capital and other general corporate needs, if any. The Company will record a pretax charge of approximately $1.4 million in the fourth quarter of fiscal 2011, ended January 30, 2011, representing the write-off of unamortized deferred financing costs related to the prior facility.
Borrowings under the new facility bear interest at LIBOR plus 2.25% to 3.00% (depending on the Company’s consolidated leverage ratio), compared to LIBOR plus 7.50% under the prior facility. There is no LIBOR floor under the new facility, unlike the prior facility which had a LIBOR floor of 3.25%. The fees for outstanding letters of credit will be between 2.375% and 3.125% (depending on the Company’s consolidated leverage ratio), compared to 7.75% under the prior facility. The Company estimates the aggregate interest expense under the new facility for the year ending January 29, 2012, including letter of credit and other fees and amortization of costs associated with the transaction, will be approximately $2.3 million, or approximately $3.1 million less than the amount of interest and fees that would have been incurred under the prior credit facility.
The new credit agreement and related pledge and security agreement and guaranty agreement will be filed as exhibits to a Current Report on Form 8-K, which will be made available on the Company’s website promptly after its filing with the Securities and Exchange Commission.
Wells Fargo Securities, LLC served as sole lead arranger of the new facility; Wells Fargo Bank, National Association, served as administrative agent.