(Bloomberg) -- Hooters of America is huddling with lenders and advisers amid revenue declines that pushed the restaurant chain to shutter several of its locations, according to people with knowledge of the talks.
Hooters, famous for its chicken wings and skimpy server uniforms, is getting guidance from Accordion Partners and law firm Ropes & Gray on how to improve business and address its debt load as foot traffic slows and its liquidity dwindles, said the people, who asked not to be named discussing confidential matters.
Some of Hooters’ debtholders have tapped Houlihan Lokey Inc. for advice, the people said. Representatives for Hooters and Accordion Partners did not respond to requests for comment. Ropes & Gray didn’t provide a comment, while a Houlihan representative declined to comment.
Hooters’ troubles come as many casual dining establishments have faced stress. Recently, TGI Friday’s Inc.’s management had to turn over control of some assets to an outside manager, after breaching debt terms by failing to file documents to bondholders on time. Red Lobster filed for bankruptcy in May.
Hooters, which was acquired by Nord Bay Capital and TriArtisan Capital Advisors in 2019 from a consortium of other private equity firms, recently closed several locations it said were “underperforming” in statements to news outlets at the time.
In those statements, Hooters reportedly cited “pressure from current market conditions,” and said it would continue to open new restaurants domestically and internationally.
The chain has about $300 million in asset-backed bonds to repay, according to data compiled by Bloomberg. Kroll Bond Rating Agency recently downgraded those securities after revenue supporting the debt dipped, according to a notice posted to KBRA’s website.
Hooters’ bonds are packaged as whole-business securitizations, through which a company pledges most of its assets, including franchise fees, as collateral. That type of structured debt is popular among restaurant chains, fitness clubs and businesses with large networks of franchised stores. The securitizations are designed to allow businesses to pay down the principal over time, rather than at once.
Other companies that have borrowed money using their assets as collateral have either restructured or refinanced their debt over the past 18 months. Coin-counting kiosk operator Coinstar restructured about $1 billion of asset-backed debt last year after facing a cash crunch that deepened in 2020. Centerline Logistics Corp., a company that refuels ships and provides other marine transport services, refinanced about $400 million of asset-backed securities last year.
©2024 Bloomberg L.P.
