| Item 1.01. | Entry into a Material Definitive Agreement |
General
As previously announced, on March 2, 2022, Wingstop Inc. (the “Company,” “we,” “our,” or “us”) entered into a definitive agreement relating to an existing securitized financing facility pursuant to a privately placed securitization transaction (the “2022 Securitization”). To complete the 2022 Securitization, on March 9, 2022 (the “Closing Date”), Wingstop Funding LLC, a Delaware limited liability company (the “Issuer”), a limited purpose, bankruptcy-remote, indirect wholly owned subsidiary of the Company issued $250 million of its Series 2022-1 3.734% Fixed Rate Senior Secured Notes, Class A-2 (the “2022 Class A-2 Notes”). The offering was exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the issuance of the 2022 Class A-2 Notes, the Issuer also entered into a revolving financing facility of Series 2022-1 Variable Funding Senior Notes, Class A-1 (the “2022 Variable Funding Notes”), which permits borrowings of up to a maximum principal amount of $200 million, a portion of which may be used to issue letters of credit. The 2022 Class A-2 Notes and the 2022 Variable Funding Notes are referred to collectively as the “2022 Notes.” Subject to certain limitations, the 2022 Notes are secured by certain of the Company’s domestic and foreign revenue-generating assets, consisting principally of franchise-related agreements, intellectual property, and vendor rebate contracts (collectively, the “Securitized Assets”), that were previously contributed or otherwise transferred to the Issuer and certain other limited-purpose, bankruptcy-remote, wholly owned indirect subsidiaries of the Company (collectively, the “Securitization Entities”) that act as guarantors pursuant to a guarantee and collateral agreement previously entered into.
2022 Class A-2 Notes
The 2022 Class A-2 Notes were issued under a Second Amended and Restated Base Indenture (the “Base Indenture”) and the related Series 2022-1 Supplement thereto (the “Series 2022-1 Supplement”), each dated March 9, 2022, by and between the Issuer and Citibank, N.A., as trustee (in such capacity, the “Trustee”) and securities intermediary. The Base Indenture and the Series 2022-1 Supplement (collectively with the Series 2020 Supplement previously entered into, the “Indenture”) will allow the Issuer to issue additional series of notes in the future, subject to certain conditions set forth therein.
Interest and principal payments on the 2022 Class A-2 Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the 2022 Class A-2 Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the 2022 Class A-2 Notes is in March of 2052, but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment date of the 2022 Class A-2 Notes will be in March 2029. If the Issuer has not repaid or refinanced the 2022 Class A-2 Notes prior to the anticipated repayment date, additional interest will accrue on the 2022 Class A-2 Notes in an amount equal to the greater of (A) 5.00% per annum and (B) a per annum interest rate equal to the excess, if any, by which the sum of the following exceeds the original interest rate of the 2022 Class A-2 Notes (i) the yield to maturity (adjusted to a quarterly bond-equivalent basis) on such anticipated repayment date of the United States Treasury Security having a term closest to 10 years, plus (ii) 5.00%, plus (iii) 1.88%.
2022 Variable Funding Notes
In connection with the issuance of the 2022 Class A-2 Notes, the Issuer also entered into a revolving financing facility consisting of 2022 Variable Funding Notes, which, subject to certain financial and other borrowing conditions set forth in the 2022 Variable Funding Note Purchase Agreement, permits borrowings of up to a maximum principal amount of $200 million, a portion of which may be used to issue letters of credit. The 2022 Variable Funding Notes were issued under the Indenture and allow for borrowings on a revolving basis. Borrowings and certain additional terms related to the 2022 Variable Funding Notes are governed by the Class A-1 Note Purchase Agreement, dated March 9, 2022, by and among the Issuer, the Guarantors, Wingstop Restaurants Inc., as manager (the “Manager”), certain conduit investors, financial institutions, and funding agents, Morgan Stanley & Co. LLC, as swingline lender, administrative agent and provider of letters of credit (the “2022 Variable Funding Note Purchase Agreement”). The 2022 Variable Funding Notes will be governed by both the 2022 Variable Funding Note Purchase Agreement and the Indenture. Depending on the type of borrowing under the 2022 Variable Funding Notes, interest on the 2022 Variable Funding Notes will be based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the secured overnight financing rate or (iv) with respect to advances made by conduit investors, the weighted average cost of, or related to, the issuance of commercial paper allocated to fund or maintain such advances, in each case plus any applicable margin, as more fully set forth in the 2022 Variable Funding Note Purchase Agreement and the Series 2022-1 Supplement. The Issuer has not drawn on the 2022 Variable Funding Notes as of the Closing Date. Commitment fees and other usage fees apply to the 2022 Variable Funding Notes facility depending on the type of borrowing requested. There is a 60-basis points draw fee on borrowings requested pursuant to the terms of the 2022 Variable Fund Note Purchase Agreement. Additionally, during a commitment availability period, there is a 30-basis point commitment fee on the committed portion of the Variable Funding Notes facility which is payable quarterly. It is anticipated that the principal and interest on the 2022 Variable Funding Notes will be repaid in full on or prior to March of 2027, subject to two additional one-year extensions at the option of the Manager. Following the anticipated repayment date (and any extensions thereof), additional interest will accrue on the 2022 Variable Funding Notes equal to 5.00% per annum.
