Red Robin International Inc., a wholly owned subsidiary of the casual dining restaurant chain Red Robin Gourmet Burgers Inc. ( RRGB ), announced the completion of a $225 million credit agreement yesterday. The new credit facility will mature in 5 years.
The new credit refinances Red Robin's prior line of credit that had a term loan of $150 million as well as $100 million of revolving line of credit and was scheduled to expire in June 2016.
The refinancing led to a 50 basis point reduction in the spread over LIBOR based on leverage as of the end of the third quarter of fiscal 2012. The revised credit agreement allows Red Robin International to increase the credit facility by up to an additional $100 million in the future, subject to lender participation.
Hence, besides paying down the company's high-cost debt, the new credit facility will increase the available fund and extend the maturity period of the debt. The company believes that the new credit facility will strengthen its financial position.
At the present level, the cash position of the company continues to improve. In 2012, Red Robin expects to use its cash flow to accelerate unit growth, reduce debt burden and repurchase stock. At the end of the third quarter, Red Robin's cash and cash equivalents were $26.9 million compared with $35.0 million at the end of 2011. The balance outstanding under the prior credit facility was $121.9 million.
Red Robin International expects to incur one-time non-cash, pre-tax charge of approximately $2.9 million in the fourth quarter of fiscal 2012 due to its new facility. The charge will be shown as a write-off of unamortized portions of the prior credit agreement and a fee associated to the re-designation of an interest rate swap.