Noble Roman’s, Inc. (OTCBB:NROM), the Indianapolis based franchisor of Noble Roman’s Pizza and Tuscano’s Italian Style Subs, today announced that it had completed the refinancing of its outstanding debt, significantly lowering its overall effective interest rate.
On May 15, 2012, Noble Roman’s, Inc. entered into a $5 million credit agreement with BMO Harris Bank N.A., which replaces notes to Wells Fargo Bank and an officer of the company. The new loan is a four-year, secured, term loan in the original principal amount of $5 million, maturing on May 15, 2016 and payable in equal monthly payments over the 48-month term of the loan. The loan bears interest at a variable rate equal to LIBOR plus 4% per annum, currently totaling 4.25%. The annual interest rate on the Wells Fargo Bank loan was LIBOR plus 4.25%, but was scheduled to increase to LIBOR plus 7.25% on July 1, 2012; the note payable to the officer had an annual interest rate of 8%.
As part of the company’s efforts to increase shareholder value, management would over time like to eliminate the company’s long-term indebtedness. As part of the new loan agreement, the company will make additional principal payments as conditions are met or allow, which could result in a final pay-off of the new loan in less than the stated four-year term of the loan. The company will: (i) prepay principal annually in an amount equal to 75% of its Excess Cash Flow, (ii) prepay principal with any proceeds from issuance of debt or equity securities, (iii) prepay the proceeds of certain asset sales, except in the ordinary course of business, in excess of $250,000 in the aggregate and, (iv) prepay certain amounts received in connection with a lawsuit in which the company is a counterclaim plaintiff. The company’s obligations under the new loan are secured by security interests in all of the company’s personal property and partially through a limited guaranty, for a maximum amount of $1.2 million, by Paul Mobley, the company’s Chairman and CEO. The new loan contains customary representations and warranties, as well as financial covenants of a maximum total leverage ratio and a minimum fixed charge coverage ratio.
The statements contained in this press release concerning the company’s future revenues, profitability, financial resources, market demand and product development are forward-looking statements (as such term is defined in the Private Securities Litigation Reform Act of 1995) relating to the company that are based on the beliefs of the management of the company, as well as assumptions and estimates made by and information currently available to the company’s management. The company’s actual results in the future may differ materially from those projected in the forward-looking statements due to risks and uncertainties that exist in the company’s operations and business environment, including, but not limited to competitive factors and pricing pressures, non-renewal of franchise agreements, shifts in market demand, general economic conditions, changes in demand for the company’s products or franchises, the success or failure of individual franchisees and changes in prices or supplies of food ingredients and labor. Should one or more of these risks or uncertainties materialize, or should underlying assumptions or estimates prove incorrect, actual results may differ materially from those described herein as anticipated, believed, estimated, expected or intended. The company undertakes no obligations to update the information in this press release for subsequent events.