Economy is so bad that fatties are reducing their gorging budget?

Carl Herrera · Jan 24, 2008

The company that owns Hometown Buffets and Old Country Buffets filed for bankruptcy, AP article talks about revenues being hurt by diners worries about the economy and switching from these restaurants to fast food.

AP
Buffets Holdings Files for Bankruptcy
Tuesday January 22, 4:26 pm ET
Restaurant Chain Buffets Holdings Files for Bankruptcy, Cites Weak Consumer Spending

PHILADELPHIA (AP) -- Buffets Holdings Inc., one of the country's largest restaurant chains, filed for bankruptcy Tuesday, becoming the U.S. retail sector's biggest casualty of the economic slowdown that has spurred consumers to cut spending.

The privately held company, which employs more than 36,000 workers nationwide, reported debts totaling $1.15 billion and assets totaling $963.6 million. In documents filed with the U.S. Bankruptcy Court in Wilmington, Del., the company attributed its financial troubles mostly to "significantly depressed consumer spending."
That slump, fueled by worries the U.S. economy is on the brink of recession, has put a growing number of retail and restaurant companies at risk of default in 2008, according to Standard & Poor's. Analysts have said "casual dining" restaurants such as Buffets have been especially vulnerable as consumers' preferences have shifted to cheaper fast-food restaurants.

Buffets, which is based in Eagan, Minn., said it has $85 million in loans available to finance its reorganization under a $385 million credit line provided by a group of existing lenders that includes Credit Suisse Group. The remainder of that credit line is considered tapped because Buffets' lenders simply "rolled over" $300 million in senior bank debt into Buffets' post-bankruptcy loan.

The company said it was unable to find new lenders willing to provide loans on "more favorable terms." In a statement Tuesday, the company's chief executive, Mike Andrews, said Buffets restaurants will remain open as the company works to reduce its debt. But he said the company will conduct "a thorough review of all underperforming locations over the next several months to determine if they can meet our long-term objectives."

Buffets serves 3.8 million customers a week in restaurants that include the Country Buffet, Ryan's and Tahoe Joe's brands. Its largest unsecured creditors include HSBC Bank, the trustee for a group of bondholders who are owed $321 million, according to court documents. The company also owes $8.7 million to North Star Foodservice Inc., a big supplier to restaurants.

Buffets' bonds have plummeted in heavy trading since the corporate credit markets ran into serious trouble in July 2007. At the start of 2007, Buffets bonds were selling above 100 cents on the dollar. On Tuesday, the company's bonds fell to 8.5 cents on the dollar as distressed-debt investors headed for the exits.

Buffets was a public company until 2000, when it was acquired by a group of investment funds affiliated with the private equity firm Caxton-Iseman Capital. Six years later, Buffets acquired Ryan's Restaurant Group Inc. in an $835-million transaction that some analysts say left it with more debt than it could handle.

"It was an aggressive capital structure that didn't work out in a declining consumer environment," said Mark Churchill, a senior research analyst with Piper Jaffray Cos.

Matthew Monks and Paul Ziobro contributed to this article
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leroy · Jan 24, 2008

It has nothing to do with their terrible food.

Harrisment · Jan 24, 2008

I thought this thread was about FFB.

Carl Herrera · Jan 24, 2008

leroy420 said:

It has nothing to do with their terrible food.
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Have you been to any of their restaurants?

leroy · Jan 24, 2008

Carl Herrera said:

Have you been to any of their restaurants?
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Yes. Ryan's & Country Buffet. If I wasn't a poor college student, I would have never eaten there again.

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