IHOP Decides Against Selling Receivables; Shares Drop 4.7%

Shares of IHOP Corp., the operator of International House of Pancakes restaurants, fell 4.7% after the company decided against raising money by selling some of its receivables.

The Glendale company said it would not sell about $200 million in loans made to its franchisees, saying a sale would come at a discount and could lead the company to violate certain debt terms. Investors had hoped that the company would use the money from a sale for purposes such as repurchasing shares, analysts said. IHOP said in January that it was considering the sale.

“This would have been a big source of potential cash that could be returned back to the hands of shareholders,” said Sidoti & Co. analyst Dennis Joe, who has a “neutral” rating on the stock. Joe said he doesn’t own IHOP shares.

IHOP dropped $1.17 to $23.97 in New York Stock Exchange trading, still higher than a 52-week low of $21.15 on Jan. 30.

Joe said investors also would have preferred that the company buy back more shares instead of declaring its first quarterly cash dividend of 25 cents a share, which would be taxable under current laws.

IHOP has bought back about 400,000 shares under its current plan to repurchase 2.6 million, he said.

The dividend is payable May 19 to shareholders of record as of May 1, the company said.