Denny’s Parent Company Signs Debt-Reduction Deal

In an effort to reduce its debt, the parent company of the Irvine-based Denny’s restaurant chain said Monday that it has signed an agreement that will provide it with $160 million in mortgage financing for 240 outlets.

TW Holdings Inc. said the financing package, which is expected to close within two weeks, was arranged by a group led by Morgan Stanley & Co. Inc. and will help pare down debt from the December purchase of TW Services.

TW Holdings’ stock closed at $5.25, up 37.5 cents, in trading on the New York Stock Exchange.

The holding company was formed last year in the $1.1-billion merger of TW Services, the nation’s fourth largest food company, and Coniston Partners, a New York-based investment group.

Karen Randall, a spokesman for Spartanburg, S.C.-based TW Holdings, said the proceeds will provide the company with about $120 million after repayment of existing mortgages and transaction expenses. The funds will be applied to reduce senior bank debt.

Bob Krist, vice president of finance for Denny’s, said operations of the restaurants involved will not be affected. The company operates more than 1,200 restaurants nationwide.

Of the 240 Denny’s being refinanced, 16 are in Southern California and eight are located elsewhere in the state, said Randall. Ninety of the restaurants are owned by Denny’s.

Also, the company plans to spend $11 million this year to remodel 65 company-owned restaurants in Los Angeles and Orange counties. Company officials say the intent is to create a more upscale appearance to head off competition from fast-food restaurants and family-style chains such as Coco’s and Bob’s Big Boy.

The company also announced that it has signed a letter of agreement with Financial Security Assurance providing for a guarantee of $225 million in financing secured by 398 Hardee’s and Quincy’s Family Steakhouse restaurants.

As part of its debt-reduction strategy, TW Holdings also is selling several non-core businesses. In June, the company completed the sale of Milnot Cos. of St. Louis, which produces and sells canned milk and meat-based products. The company also has reached an agreement to sell American Medical Services, a nursing home subsidiary in California, Randall said.