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JACK IN THE BOX INC. (NASDAQ:JACK) Files An 8-K Entry into a Material Definitive Agreement

JACK IN THE BOX INC. (NASDAQ:JACK) Files An 8-K Entry into a Material Definitive Agreement
Item 1.01 Entry into a Material Definitive Agreement.

General
On July 8, 2019 (the “Closing Date”), Jack in the Box Funding, LLC (the “Master Issuer”), a limited-purpose, bankruptcy-remote, wholly owned indirect subsidiary of Jack in the Box Inc. (the “Company”), completed its previously announced financing transaction and issued $575 million of its Series 2019-1 3.982% Fixed Rate Senior Secured Notes, Class A-2-I (the “Class A-2-I Notes”), $275 million of its Series 2019-1 4.476% Fixed Rate Senior Secured Notes, Class A-2-II (the “Class A-2-II Notes”) and $450 million of its Series 2019-1 4.970% Fixed Rate Senior Secured Notes, Class A-2-III (the “Class A-2-III Notes” and together with the Class A-2-I Notes and the Class A-2-II Notes, the “Class A-2 Notes”), in an offering exempt from registration under the Securities Act of 1933, as amended (the “Securities Act”). In connection with the issuance of the Class A-2 Notes, the Master Issuer also entered into a revolving financing facility of Series 2019-1 Variable Funding Senior Secured Notes, Class A-1 (the “Variable Funding Notes”), which allows for the drawing of up to $150 million under the Variable Funding Notes, which include certain instruments, including a letter of credit facility. The Class A-2 Notes and the Variable Funding Notes are referred to collectively as the “Notes.” The Notes were issued in a privately placed securitization transaction to which certain of the Company’s revenue-generating assets, consisting principally of franchise-related agreements, real estate assets, and intellectual property and license agreements for the use of intellectual property, are held by the Master Issuer and certain other limited-purpose, bankruptcy remote, wholly owned indirect subsidiaries of the Company that act as Guarantors (as defined below) of the Notes and that have pledged substantially all of their assets, excluding certain real estate assets and subject to certain limitations, to secure the Notes.
The Notes were issued under a Base Indenture, dated July 8, 2019, a copy of which is attached to this Current Report on Form 8-K as Exhibit 4.1 (the “Base Indenture”), and the related supplemental indenture dated as of July 8, 2019, a copy of which is attached to this Current Report on Form 8-K as Exhibit 4.2 (the “Series 2019-1 Supplement” and collectively with the Base Indenture, the “Indenture”) each between the Master Issuer and Citibank, N.A., as trustee (in such capacity, the “Trustee”) and securities intermediary. The Indenture allows the Master Issuer to issue additional series of notes in the future subject to certain conditions.
Class A-2 Notes
Interest and principal payments on the 2019 Notes are payable on a quarterly basis. The requirement to make such quarterly principal payments on the Class A-2 Notes is subject to certain financial conditions set forth in the Indenture. The legal final maturity date of the Notes is in August 2049, but, unless earlier prepaid to the extent permitted under the Indenture, the anticipated repayment dates of the Class A-2-I Notes, the Class A-2-II Notes and the Class A-2-III Notes will be August 2023, August 2026 and August 2029, respectively. If the Master Issuer has not repaid or refinanced the Class A-2 Notes prior to the respective anticipated repayment date, additional interest will accrue on each tranche of the Class A-2 Notes at a rate equal to the greater of (A) 5.00% per 2 annum and (B) a per annum interest rate equal to the amount, if any, by which the sum of (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) with respect to the Series 2019-1 Class A-2-I Notes, 2.265%, (2) with respect to the Series 2019-1 Class A-2-II Notes, 2.670%, and (3) with respect to the Series 2019-1 Class A-2-III Notes, 3.058%, exceeds the original interest rate with respect to such tranche. The Class A-2 Notes are secured by the collateral described below under “Guarantees and Collateral.”
Variable Funding Notes
The Variable Funding Notes were issued under the Indenture and allow for drawings on a revolving basis. Drawings and certain additional terms related to the Variable Funding Notes are governed by the Class A-1 Note Purchase Agreement, dated July 8, 2019 (the “Variable Funding Note Purchase Agreement”), a copy of which is attached hereto as Exhibit 10.1 and is incorporated herein by reference, by and among the Master Issuer, the Guarantors (as defined below), Jack in the Box Inc. as manager (the “Manager”), certain conduit investors, financial institutions and funding agents, and Coöperatieve Rabobank, U.A., New York Branch, as provider of letters of credit, as swingline lender and as administrative agent. The Variable Funding Notes will be governed by both the Variable Funding Note Purchase Agreement and the Indenture. Depending on the type of borrowing under the Variable Funding Notes, interest on the Variable Funding Notes will be based on (i) the prime rate, (ii) overnight federal funds rates, (iii) the London interbank offered rate for U.S. Dollars 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 Variable Funding Note Purchase Agreement. While the Master Issuer does not anticipate drawing on the Variable Funding Notes on the Closing Date, the Master Issuer expects to have approximately $76 million in undrawn letters of credit issued under the Variable Funding Notes on the Closing Date. There is a commitment fee on the unused portion of the Variable Funding Notes facility, which ranges from 50 basis points to 100 basis points based on the utilization under the Variable Funding Notes facility. As of the Closing Date, it is anticipated that the principal and interest on the Variable Funding Notes will be repaid in full on or prior to August 2024, subject to two one-year extensions at the option of the Manager. Following the anticipated repayment date (and any extensions thereof), additional interest will accrue on the Variable Funding Notes equal to 5.00% per annum. The Variable Funding Notes and other credit instruments issued under the Variable Funding Note Purchase Agreement are secured by the collateral described below under “Guarantees and Collateral.”
Guarantees and Collateral
to the Guarantee and Collateral Agreement, dated July 8, 2019 (the “Guarantee and Collateral Agreement”), a copy of which is attached hereto as Exhibit 10.2, by and among Jack in the Box SPV Guarantor, LLC, Different Rules, LLC, and Jack in the Box Properties, LLC, each as a guarantor of the Notes (collectively, the “Guarantors”), in favor of Citibank, N.A., as trustee, the Guarantors guarantee the obligations of the Master Issuer under the Indenture and related documents and secure the guarantee by granting a security interest in substantially all of their assets, except for certain real estate assets and subject to certain limitations as set forth therein. The Notes are secured by a security interest in substantially all of the assets of the Master Issuer and the Guarantors (collectively, the “Securitization Entities”), except for certain real estate assets and subject to certain limitations as set forth in the Indenture and the Guarantee and Collateral Agreement. The assets of the Securitization Entities include most of the revenue-generating assets of the Company and its subsidiaries, which principally consist of franchise-related agreements, certain Company-operated restaurants, intellectual property and license agreements for the use of intellectual property. Upon certain trigger events, mortgages will be required to be prepared and recorded on the real estate assets. The assets of the Securitization Entities, including real estate assets, are referred to herein as the “Securitized Assets.” The Notes are obligations only of the Master Issuer to the Indenture and are unconditionally and irrevocably guaranteed by the Guarantors to the Guarantee and Collateral Agreement. The pledge and security interest provisions with respect to the Master Issuer are included in the Indenture. Except as described below, neither the Company nor any subsidiary of the Company, other than the Securitization Entities, will guarantee or in any way be liable for the obligations of the Master Issuer under the Indenture or the Notes.
Management of the Securitized Assets
None of the Securitization Entities has employees. Each of the Securitization Entities entered into a Management Agreement dated July 8, 2019, a copy of which is attached as Exhibit 10.3, among the Securitization Entities, the Manager and the Trustee. to the Management Agreement, Jack in the Box Inc. acts as the Manager with respect to the Securitized Assets. The primary responsibilities of the Manager are to perform certain franchising, real estate, intellectual property and operational functions on behalf of the Securitization Entities with respect to the Securitized Assets to the Management Agreement. The Manager is entitled to the payment of a weekly management fee, as set forth in the Management Agreement, which includes reimbursement of certain expenses, and is subject to the liabilities set forth in the Management Agreement. The Manager manages and administers the Securitized Assets in accordance with the terms of the Management Agreement and, except as otherwise provided in the Management Agreement, the management standard set forth in the Management Agreement. Subject to limited exceptions set forth in the Management Agreement, the Management Agreement does not require the Manager to expend or risk its funds or otherwise incur any financial liability in the performance of any of its rights or powers under the Management Agreement if the Manager has reasonable grounds for believing that repayment of such funds or adequate indemnity against such risk or liability is not reasonably assured or provided to it. Subject to limited exceptions set forth in the Management Agreement, the Manager will indemnify each Securitization Entity, the trustee and certain other parties, and their respective officers, directors, employees and agents for all claims, penalties, fines, forfeitures, losses, legal fees and related costs and judgments and other costs, fees and reasonable expenses that any of them may incur as a result of (i) the failure of the Manager to perform its obligations under the Management Agreement, (ii) the breach by the Manager of any representation or warranty under the Management Agreement or (iii) the Manager’s negligence, bad faith or willful misconduct.
Covenants and Restrictions
The Notes are subject to a series of covenants and restrictions customary for transactions of this type, including (i) that the Master Issuer maintains specified reserve accounts to be used to make required payments in respect of the Notes, (ii) provisions relating to optional and mandatory prepayments and the related payment of specified amounts, including specified make-whole payments in the case of the Class A-2 Notes under certain circumstances, (iii) certain indemnification payments in the event, among other things, that the assets pledged as collateral for the Notes are in stated ways defective or ineffective and (iv) covenants relating to recordkeeping, access to information and similar matters. The Notes are also subject to customary rapid amortization events provided for in the Indenture, including events tied to (i) failure to maintain stated debt service coverage ratios, (ii) the sum of gross sales for specified restaurants being below certain levels on certain measurement dates, (iii) certain manager termination events (including in certain circumstances a change of control of the Company), (iv) the occurrence of an event of default, and (v) the failure to repay or refinance the Class A-2 Notes in full by the applicable anticipated repayment date. The Notes are also subject to certain customary events of default, including, without limitation, events relating to (i) non-payment of required interest, principal or other amounts due on or with respect to the Notes, (ii) failure to comply with covenants within certain time frames, (iii) certain bankruptcy events, (iv) breaches of specified representations and warranties, (v) the trustee ceasing to have valid and perfected security interests in certain collateral, and (vi) certain judgments.
Use of Proceeds
The net proceeds of the offering, together with cash on the Company’s balance sheet, has been or will be used to repay all of the existing indebtedness under the Company’s senior credit facility, to pay the transaction costs and to fund the reserve accounts associated with the securitized financing facility, and for working capital purposes and for general corporate purposes, which may include a return of capital to the Company’s equity holders.The Notes have not been and will not be registered under the Securities Act and may not be offered or sold in the United States absent such registration or an exemption from the registration requirements of the Securities Act. This Current Report on Form 8-K shall not constitute an offer to sell or the solicitation of an offer to buy the Notes or any other security and shall not constitute an offer, solicitation or sale of the Notes or any other security in any jurisdiction where such an offering or sale would be unlawful. The foregoing summaries do not purport to be complete and are subject to, and qualified in their entirety by reference to, the complete copies of the Base Indenture, the Series 2019-1 Supplement, the Variable Funding Note Purchase Agreement, the Guarantee and Collateral Agreement and the Management Agreement, which have been filed as Exhibits 4.1, 4.2, 10.1, 10.2 and 10.3, respectively, hereto and are hereby incorporated herein by reference. Interested parties should read the documents in their entirety.
Item 2.03 Creation of a Direct Financial Obligation or an Obligation under an Off-Balance Sheet Arrangement of a Registrant.
The information set forth under Item 1.01 above is hereby incorporated by reference into this Item 2.03.
Item 8.01 Other Events.
In connection with the completion of the refinancing transaction, the Company issued a press release on July 8, 2019, which is attached hereto as Exhibit 99.1 and is incorporated herein by reference.
Item 9.01 Financial Statements and Exhibits.
(d) Exhibits. The following exhibits are being filed with this Current Report on Form 8-K.
JACK IN THE BOX INC /NEW/ Exhibit
EX-4.1 2 a52009364ex4_1.htm EXHIBIT 4.1 Exhibit 4.1 EXECUTION VERSION Dated as of July 8,…
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About JACK IN THE BOX INC. (NASDAQ:JACK)

Jack in the Box Inc. operates and franchises Jack in the Box quick-service restaurants (QSRs) and Qdoba Mexican Eats (Qdoba) fast-casual restaurants. The Company operates in two segments: Jack in the Box and Qdoba restaurant operations. Qdoba is a fast-casual Mexican food brand in the United States, offering food items including burritos, tacos, salads, and quesadillas. Jack in the Box is a hamburger chain, which offers a selection of products, including classic burgers such as, Jumbo Jack burgers, and new product lines, such as Buttery Jack burgers, and its Brunchfast menu. As of October 2, 2016, the Company operated 2,954 Jack in the Box QSRs and Qdoba fast-casual restaurants. As of October 2, 2016, Jack in the Box system included 2,255restaurants, of which 417 were company-operated and 1,838 were franchise operated. As of October 2, 2016, the Qdoba system included 699 restaurants, of which 367 were company operated and 332 were franchise operated.