Hamburger Hamlet Stock Falls 68% on News of Further Loss

Shares in Hamburger Hamlet Restaurants Inc. plummeted 68% on Thursday after the struggling Sherman Oaks-based company reported that its loss had widened to $1.7 million for the third quarter and that it may be forced into a bankruptcy filing.

In a filing to the Securities and Exchange Commission, the 45-year-old restaurant chain--among the region’s most successful in the 1950s--said that its bank will not extend further credit because the company is in violation of the covenants accompanying a $12.5-million line of credit it obtained in June. So far, the unnamed bank has refused to change the credit terms, but it has asked the company to provide more information on its operations, Hamburger Hamlet reported.

If the bank calls the company’s debts due immediately, Hamburger Hamlet “believes that it would have no choice but to file a petition under Chapter 11” of the federal Bankruptcy Code, the company stated.

The company said it is negotiating with its bank regarding the violations and a change in borrowing terms.

Hamburger Hamlet shares closed Thursday at a record low of 81.25 cents, down $1.75 on Nasdaq. A total of 2.65 million shares changed hands.

At one point, the price per share hit 50 cents--80% below the figure at the opening bell.

The news of further losses came as something of a surprise, as the company had brought in new management in 1994 and had appeared to be headed for a turnaround.

Chief Executive Shawn Holder, a former dishwasher who helped build the Islands restaurant chain, had promised to update the restaurants to compete.

“The most embarrassing thing is that these people came in and were extremely critical of former management. They came in sounding like they had a solution, and the problem seems to have gotten worse,” said Stephen Weinress, a managing director of L.H. Friend, Weinress, Frankson & Presson, an investment banking firm in Irvine.

Hamburger Hamlet declined to comment Thursday.

Management had not made any announcement that losses had been anticipated for the quarter and it had issued no press release by day’s end Thursday.

According to its filing with the SEC, Hamburger Hamlet’s loss for the quarter ended Sept. 24 was $1.7 million, up from the loss of $873,000 for the third quarter last year. Revenue dipped 13% to $14.71 million from $16.84 million for the period last year. For the first nine months, the loss was $1.9 million on revenue of $47.96 million. Sales were down 7% from those for the first nine months of 1994.