Pennzoil Deal Gives Jiffy Lube Breathing Room

With an agreement from Pennzoil Co. to pump $18 million into its operation, Jiffy Lube International Inc. has received a 90-day grace period from its lenders to work out its financial problems, the company announced Thursday.

The company also said it had laid off 55 employees Wednesday.

“I am very pleased and thankful that the lenders and the suppliers are cooperating,” said W. James Hindman, president, chairman and chief executive of Jiffy Lube. “It’s a much needed boost.”

The announcement comes after days of rumors that the quick lube chain might soon file for bankruptcy. But Hindman denied that there were any plans for such a filing.

The 55-person layoff reduces the company’s work force to 140 in Baltimore, Los Angeles and Cedar Rapids, Iowa. The company Wednesday also closed its Houston office, which had three or four workers.

Jiffy Lube had laid off 20 workers in November.

“It’s a very lean machine,” Hindman said. “We believe we are in a position to do all of the programs,” he said.

The $18 million from Pennzoil, its largest supplier, includes $6 million in cash for the purchase of real estate, the assumption of about $4 million in mortgages and various other considerations such as deferring interest on $15 million of subordinated debentures, and forgiving some debts for supplies and advertising.

Shedding Real Estate

In a separate transaction, Jiffy Lube agreed to sell $5 million of its real estate to other parties.

With these transactions, the company will be getting out of the real estate business, which had been “a major problem,” Hindman said.

As part of its rapid expansion, Jiffy Lube had formed a variety of limited real estate partnerships and had provided financing to its franchises.