Steak 'n Shake Taps Adviser for Possible Debt Restructuring -- Update
By Alexander Gladstone and Aisha Al-Muslim
Steak 'n Shake Inc. is preparing for a possible financial
restructuring and has hired an advisory firm to evaluate options as
the Covid-19 pandemic continues to hit the casual-dining sector
hard, according to people familiar with the matter.
The Indianapolis-based burger-and-milkshake chain hired FTI
Consulting Inc. to advise on a restructuring strategy, the people
said. Steak 'n Shake, owned by entrepreneur Sardar Biglari's
eponymous holding company, has struggled with restrictions on
indoor dining and has a $153 million loan coming due in March, they
Steak 'n Shake, Biglari Holdings Inc., and FTI didn't
immediately respond to requests for comment. Biglari Holdings said
in a November securities filing that Steak 'n Shake may not be able
to refinance its loan before the March maturity.
The company, which as of September operated 260 restaurants
across the U.S., Europe and the Middle East, in addition to more
than 200 franchises, sparked a fight with lenders over the summer
by putting 15 locations up for sale. Lenders said any proceeds from
the sale had to be used to pay down debt and couldn't be reinvested
in the business. Steak 'n Shake sued the lenders' trustee
Wilmington Trust NA in New York federal court in August but dropped
the complaint last week.
Law firm Latham & Watkins LLP, which handled the litigation
for Steak 'n Shake, continues to advise the company, the people
familiar with the matter said. The lenders are advised by law firm
Arnold Porter Kaye Scholer LLP and AlixPartners LLP.
The company is now exploring a possible out-of-court
restructuring of its debt and lease obligations or a bankruptcy
filing, the people said.
The pandemic has taken a heavy toll on Steak 'n Shake's
business. The company reported $78.3 million in revenue for the
third quarter of 2020, down from $141.4 million over the same
period the prior year.
Biglari Holdings said in November in its third-quarter earnings
report that after having had to close many of its Steak 'n Shake
dining rooms as Covid-19 began spreading, the company is aiming to
shift from a full-service model to a self-service model when
reopening them, to save costs. But the company said it needs to
make capital investments to complete these conversions, while
lenders are blocking it from accessing the needed funding.
Biglari Holdings' restaurant division, which also includes four
Western Sizzlin Corp. steakhouses that the company operates itself
and 48 Western Sizzlin franchises, saw same-store traffic decline
by 54% during the quarter, largely due to the pandemic, according
to the earnings report.
Steak 'n Shake traces its roots to a hamburger stand founded in
1934. It passed through a series of owners before Mr. Biglari took
control in 2008 and invested heavily in expanding the business
throughout the U.S. and abroad.
Mr. Biglari, 43, who serves as Steak 'n Shake's chief executive,
has built a sprawling business empire. In addition to Steak 'n
Shake and Western Sizzlin, Biglari Holdings owns men's magazine
Maxim, insurance firms First Guard Insurance Co. and Southern
Pioneer Property & Casualty Insurance Co., and oil-and-gas
driller Southern Oil Co.
One of Mr. Biglari's investment vehicles, Biglari Capital Group,
also currently holds a sizable stake in Cracker Barrel Old Country
Many casual-dining companies have posted double-digit sales
declines during the coronavirus pandemic, with those that built
operations around serving customers in dining rooms facing the most
severe threat. Some, including Ruby Tuesday Inc., California Pizza
Kitchen Inc. and Sizzler USA Inc., have filed for bankruptcy
Jonathan Randles contributed to this article.
Write to Alexander Gladstone at email@example.com and
Aisha Al-Muslim at firstname.lastname@example.org
(END) Dow Jones Newswires
January 19, 2021 16:08 ET (21:08 GMT)
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