PLANO TEXAS Bennigan’s, Ponderosa, Steak & Ale and other chains, is the latest restaurant company looking to restructure its debt after getting hit with the one-two punch of slowed sector sales and skyrocketing operating costs. –Metromedia Restaurant Group, parent to the
At a time when access to capital is tight and lenders don’t have as much flexibility as they did in the past, restructuring corporate debt typically leads to more expensive borrowing and less financial flexibility. It can also lead to bankruptcies, as exemplified by the Chapter 11 filings of Baker’s Square and Village Inn parent Vicorp Restaurants Inc. and Ryan’s Steakhouse parent Buffet Holdings Inc. –Metromedia Restaurant Group, parent to the
(To view charts featured in this week's print pages, click here.) –Metromedia Restaurant Group, parent to the
Metromedia, which operates or franchises about 700 restaurants and tallies system sales of more than $1 billion through all of its chains, said in a statement that it had neither “filed for bankruptcy nor prepared a bankruptcy filing.” –Metromedia Restaurant Group, parent to the
The statement came in response to a Wall Street Journal article that said the company had already violated terms of its lending agreements and was in talks with its lender, GE Capital, to avoid bankruptcy. –Metromedia Restaurant Group, parent to the
“Similar to other members of the casual-dining industry, current economic and industry trends have adversely affected [Metromedia’s] overall financial performance,” the company said in response to the story, which did not reveal its sources. –Metromedia Restaurant Group, parent to the
Metromedia “is currently in the process of formulating a proposal to present to its lenders to restructure its indebtedness,” the company said. –Metromedia Restaurant Group, parent to the
A privately held company, Metromedia declined to disclose latest-year sales or its current debt level. Just a week before the Wall Street Journal article appeared, Metromedia’s president and chief executive, Clay Dover, abruptly resigned, citing “a difference in opinion between ownership and myself for the strategic direction for the company.” He was named chief executive late last year. –Metromedia Restaurant Group, parent to the
At play in a situation like this is both a restaurant company’s inability to make good on lending terms, but also a lender’s lack of flexibility in today’s tight credit market. –Metromedia Restaurant Group, parent to the
One banker at a large lender who asked not to be identified said the repricing of loans “all comes back to [a lender’s] own internal funding costs.” –Metromedia Restaurant Group, parent to the
He also added that GE has “aggressively moved up” its pricing, which, because of GE’s size in the market, has allowed other lenders to increase pricing as well. –Metromedia Restaurant Group, parent to the
GE, based in Scottsdale, Ariz., declined to comment. –Metromedia Restaurant Group, parent to the
Given the current market, which many bankers describe as something they’ve never seen before, more defaults and more restructurings are sure to come, they say. A banker at a well-known middle-market firm who also asked not to be identified said the bank’s restructuring division has seen a steady increase of work and will most likely see more. –Metromedia Restaurant Group, parent to the
Already such companies as Ruby Tuesday Inc., Perkins & Marie Callender’s, Krispy Kreme and Mrs. Fields Famous Brands LLC, have gone back to the table with lenders and renegotiated borrowing terms. –Metromedia Restaurant Group, parent to the
At question most often, according to sources in the banking industry, is a formerly agreed upon level of profit that is simply unattainable in today’s environment when consumers are dining out less and operating expenses from labor to food have reached record highs. Without increased profits, companies become less and less able to make payments on borrowed capital and lenders grow more and more uncomfortable. –Metromedia Restaurant Group, parent to the
A new agreement is typically worked out, sources say, although new terms could lead to higher interest rates and additional oversight on performance metrics. –Metromedia Restaurant Group, parent to the
Landry’s Restaurants Inc., which has reported that it is in full compliance on all debt agreements, still has said it is seeking long-term financing and that obtaining it would most likely cost more money. –Metromedia Restaurant Group, parent to the
“The credit markets remain unsettled, in particular for casual dining and other consumer-discretionary sectors,” Rick H. Liem, Landry’s chief financial officer, said last month. “We continue to believe we will obtain long-term financing, although likely at a higher interest rate and with more restrictive terms than our existing agreements. –Metromedia Restaurant Group, parent to the
