Financing

Lenders agree to give Checkers/Rally's more time to refinance debt

Loans were due on April 24, but now Checkers Drive-In Restaurants Inc. will have more time to build on the momentum of its business.
Checkers Drive-In exterior
Both Checkers and Rally's have AUVs of about $1.1 million./Photo courtesy of Shutterstock.

Lenders to Checkers Drive-In Restaurants Inc. on Friday agreed to give the quick-service operator and franchisor more time to work on an ongoing refinancing of debt.

The Tampa, Fla.-based company said in a statement that it has entered into an agreement with lenders that “addresses an upcoming maturity as it finalizes the terms of a recapitalization, which will significantly delever its balance sheet, enabling the company to continue to build on the strong momentum of the business.”

In 2020, the company hired investment banking firm Miller Buckfire & Co. to address its debt, which was scheduled to come due on April 24 this year. With lenders agreeing to a forbearance, the company said it will continue working with advisors and creditors to finalize an agreement.

The company also said business operations and cash flow remain strong, and that the issue would not impact day-to-day operations.

Checkers, which operates and franchises more than 800 drive-in restaurants, is owned by private-equity firm Oak Hill Capital Partners. In January, Checkers said it is looking to refinance to improve “financial flexibility.” The company blamed record-level inflation faced by the industry as a whole.

Standard & Poors, a bond rating agency, had downgraded its credit rating, saying a restructuring would be necessary given its high-risk form of “payment-in-kind” financing. Because of its heavy debt load, the company has been considered a candidate for bankruptcy.

Oak Hill, however, injected $20 million in cash in 2021, and the company has been working on operations, adding a loyalty program and voice-activated ordering technology in its drive-thrus. The company expected to add about 60 units in 2022. Commodity pressures have also eased in 2023, helping to boost margins within the industry.

In fiscal 2022, sales for the 534-unit Checkers brand were $618 million, up 1.6% from the previous year, according to sister company Technomic. Sales for the 293-unit Rally’s brand were $332 million, a 2.9% increase.

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