Wed 09/02/2020 12:54 PM
Covenants by Reorg’s covenant relief timeline for 11 restaurant companies can be found below and is available for download in PDF version hereContinue reading for our covenant analysis of the Covid-19-impacted restaurant industry, and request a trial to follow thousands of distressed and performing credits. 

Since the global economy came to a halt in March, most restaurant businesses have been forced to right-size their operations and their balance sheets to survive during the Covid-19 pandemic. In addition to enhancing liquidity through revolver draws and capital markets issuances, many restaurant companies have obtained credit agreement amendments that provide temporary covenant relief in exchange for certain lender-friendly concessions, such as minimum liquidity requirements and temporary restrictions on basket usage.

In this update, we provide a high-level overview of such covenant relief obtained by 11 public restaurant companies: (1) BJ’s Restaurants; (2) Bloomin’ Brands; (3) Brinker International; (4) Cheesecake Factory; (5) Cracker Barrel; (6) Dave & Busters; (7) Denny’s; (8) Fiesta Restaurant Group; (9) Noodles & Co.; (10) Red Robin; and (11) Shake Shack. Specifically, the below covenant relief timeline lays out the timing and level of the next financial covenant test for each company reviewed, as well as the duration of the minimum liquidity and basket restriction periods applicable to each company.

We find that, in each case other than BJ’s Restaurants, financial covenants are expected to be reinstated in the first half of 2021, in most instances at looser levels than their pre-amendment counterparts. We also find that minimum liquidity requirements and basket restrictions generally applied for the duration of the covenant suspension period and, in most cases, continued to apply to some extent after reinstatement.

Restaurant industry covenants analysis from the Reorg team

(Click here to see the full timeline.)

--Julian Bulaon
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