Uno's Chicago is looking to defer interest payment
NEW YORK -- Uno's Chicago Grill has the resources to pay a $7.5 million interest payment due Friday but is availing itself of a 30-day grace period, the company's chief financial officer said Wednesday after a report raised concerns that the chain might default.
Louie Psallidas, CFO of parent company Uno Restaurant Holdings Corp., said in an interview that the chain was holding out on the payment in an effort to recapitalize the business.
(Sun-Times file)
''We have a productive active dialogue going on with our bondholders,'' Psallidas said.
The Wall Street Journal reported Wednesday, citing sources it did not identify, that the chain famous for its deep-dish pizza was deferring the payment and was in talks for a waiver or an amendment. The interest payment is on the company's $141 million in senior secured notes.
Psallidas said the original agreement for the notes in 2005 included a clause allowing a 30-day grace period for the payment -- a clause he said was standard in such a document.
Uno's wants to restructure its balance sheet, Psallidas said, adding that if a recapitalization can not be hammered out within the grace period, it will make the interest payment. He emphasized that until the 30 days are up, the company is not in default.
The news that Uno's would not make the payment on its original due date came just weeks after fellow casual dining company S&A Restaurant Corp., the parent company of Bennigan's and Steak & Ale restaurants, filed for Chapter 7 bankruptcy protection under pressure to repay its debts. S&A is owned by Metromedia Restaurant Group, a part of billionaire John Kluge's empire. In a Chapter 7 filing, a company seeks to liquidate its assets and close its doors.
Several other chains have filed for bankruptcy protection this year, including Vicorp Restaurants Inc. -- which operates the Village Inn and Bakers Square chains -- and Roadhouse Grill Inc.
With gas prices staying above year-ago levels and the housing market still in tatters in many areas of the country, restaurants have been struggling. Cash-strapped consumers, wary of spending money on a dinner out with the economy faltering, have cut back on discretionary spending. The hardest hit have been casual dining chains and bar and grill restaurants, which charge higher prices than fast food and other quick-service chains.
Meanwhile, commodity and labor costs have soared, squeezing margins. Credit has also tightened.
The combination of those factors at once has made it difficult for some chains to make enough money to pay their debts. Chains that used previously easy-to-get credit to expand quickly in the early 2000s may be most in danger since the debt from that growth is now coming due, analysts have said.
Same-store sales for Uno's first quarter fell 2.3 percent, slightly more than the average 1.1 percent decline at mid-priced sit-down chains, according to research service Knapp-Track, which measures sales at more than 10,000 restaurants.