Restaurant Enterprises Loss Prompts Move to Restructure Debt
Restaurant Enterprises Group Inc., operators of such popular eateries as Carrows, Reuben’s and El Torito, said Thursday that it lost $9.3 million for the second quarter and has hired two investment banking firms to help it restructure its long-term debt.
Corporate executives said that the financial condition of the privately held Irvine-based company is not serious enough at present for them to consider seeking any relief in U.S. Bankruptcy Court.
They said that a restructuring plan would allow Restaurant Enterprises to make an interest payment due Dec. 15 on about $275 million of subordinated debt--essentially corporate IOUs--and undertake such projects as the conversion of Bob’s Big Boy and Allie’s restaurants into the Coco’s and Carrows chains.
The company said in a press release that it hired the investment banking firms of Morgan Stanley & Co. Inc. and Nomura Securities International Inc. to find a way to restructure the debt left over from a management-led 1986 leveraged buyout of W.R. Grace & Co.’s restaurant division, which created the nucleus of Restaurant Enterprises.
“While they are still formulating a plan, they have given us clear preliminary indications that the restructure . . . is doable,” Norman N. Habermann, the company’s president, said in an interview.
Habermann said the company is paying on an average interest rate of 12.5% on two 6-year-old loans and hopes to be able to take advantage of new, lower interest rates through the restructure.
Restaurant Enterprises has already paid off $300 million in loans and faces a major principal payment due in 1994, said Habermann and Martin M. Casey, the company’s executive vice president. They said the company is presently current on all of its payments.
The company blamed interest payments on the debt securities for the second-quarter loss. Before interest and taxes, the company had a $2.3-million operating income.
The $9.3-million loss for the quarter ended June 29 is nearly fourfold more than its $2.4-million loss for last year’s second quarter. Revenue grew 7.5% to $245 million for this year’s second quarter from $227.9 million last year.
For the first six months of the fiscal year, Restaurant Enterprises lost $19.7 million, compared to a loss of $8.3 million for the same period last year. Sales for the six months rose 5% to $468.8 million from $446.1 million last year.
The company operates 604 restaurants in 24 states and the District of Columbia and has licensing agreements for restaurants in Japan and South Korea. Among its other chains are jojos, Charley Brown’s and Casa Gallardo.
