Golden, CO - Boston Chicken, Inc. announced that it has re-negotiated its senior credit facility to provide $39.3 million in bank financing and has hired the investment banking firm of BTAlex.Brown to assist the company with restructuring its debt.
The new bank line of credit matures on October 17, 1998, at which time approximately $219 million of the company's other senior debt also comes due. As the company said previously, it will attempt to refinance its senior credit, restructure its outstanding publicly traded convertible subordinated debt and raise additional debt and/or equity financing before the senior debt payment is due.
“We are pleased with the vote of confidence our lenders have extended to us with this additional credit, giving us time to rebuild our capital structure. While we have only three months to do so, we are optimistic that if we have the cooperation of our subordinated debt holders, we will be able to accomplish this task,” said J. Michael Jenkins, chairman, CEO and president of Boston Chicken, Inc. “Restructuring our debt is the next step toward getting the company back on track. It will allow all of our resources to focus 100% on increasing transactions and improving profitability in our restaurants. Bottom line, we want the focus to be on running a restaurant company.”
The company said that with the amended credit agreement, its senior lenders have agreed to forbear the second quarter net average weekly per store sales covenant in the company's credit facility. Covenants governing the new bank line of credit include meeting minimum cumulative system wide cash flow amounts and adherence to an operating budget that has been agreed to with the lenders. The company said its lenders will also defer $1.5 million of certain master lease payments due July 15, 1998.
Boston Chicken said it would use the $39.3 million financing primarily for working capital, refinancing and restructuring costs, master lease interest and partial principal payments due July 15, 1998 and interest due in August on the company's 4 1/2% Convertible Subordinated Debentures. Agents for the senior credit facility are Bank of America National Trust and Savings Association and General Electric Capital Corporation.
The company said BTAlex.Brown would focus on restructuring the subordinated debt, currently totaling approximately $623 million, and on refinancing the senior debt. “We chose BTAlex.Brown because of their significant experience and successful track record in negotiating complex restructurings,” said Lawrence E. White, chief financial officer of Boston Chicken. “Barry W. Ridings, the head of the BTAlex.Brown restructuring group will lead this assignment.”
In addition, the company also announced that it has converted a total of $564 million of loans to ten area developers into a majority ownership interest in each of those area developers. This increases the number of company-owned Boston Market restaurants by 527, bringing the total of company- owned restaurants to 936 or approximately 81% of the Boston Market system. Conversions of the loans follow the company's acquisition of BC Equity Funding, L.L.C. and Market Partners, L.L.C., funds that previously held preferred equity interests in these area developers.
The company said it acquired the two preferred funds in a primarily non- cash transaction per terms previously announced. Those terms included an aggregate $126.8 million of PIK (Payment In Kind) Preferred Stock, 3,500,000 shares of common stock and $10 million in cash, which previously was set aside in escrow. The 10% dividend on the Preferred Stock is payable in additional shares of Preferred Stock for a period of three years and payable in cash thereafter. The Preferred Stock is optionally redeemable by the company at any time, in cash, at redemption prices, which start at 50% of the face amount and increase over time. The Preferred Stock is mandatorily redeemable in 2005 at a price of 110% of the face amount.
Boston Chicken, Inc. franchises and operates restaurants under the Boston Market brand name that specialize in fresh, convenient meal solutions, featuring homestyle entrees, fresh vegetables, sandwiches, salads and side dishes. Boston Market combines the freshness and quality of traditional home cooking with convenience and value. As of July 12, 1998, the end of the company's second fiscal quarter, there were 1149 Boston Market restaurants in 38 states and the District of Columbia. Boston Chicken also owns a majority interest in Einstein/Noah Bagel. Corp.
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