Krispy Kreme asks lenders to ease debt terms

WINSTON-SALEM N.C. Krispy Kreme Doughnuts Inc. said Tuesday it has asked its lenders to relax credit covenants that are expected to become “more stringent” in the current year.

The company said it has proposed credit facility amendments but did not detail the changes. It added that even with beneficial changes the company’s cost of credit will increase this year. Krispy Kreme said it expected to attain the amendments but that it does not have any assurances from lenders.

The company, which operates or franchises 449 namesake locations, said it was in compliance with all financial covenants as of Feb. 3, which marked the end of the company’s 2008 fiscal year. As of that date, Krispy Kreme’s outstanding balance on its term loan totaled $76.1 million and outstanding letters of credit totaled $20.3 million. The balance on the term loan reflects a prepayment of $10.9 million made on Feb. 1, which was paid for by the company’s sale of its doughnut mix manufacturing and distribution facility in Illinois.

Krispy Kreme has suffered for almost four years with declining sales and profits, and has been trying for more than a year to orchestrate a turnaround. For its fiscal third quarter, which ended in October and was reported in December, revenue and unit-economics continued to deteriorate, with both corporate and franchised units closing due to economic pressures. Revenue fell 11.7 percent to $103.4 million. Krispy Kreme’s third-quarter loss was reduced to $798,000 from a loss of $7.2 million a year earlier, when the company tallied impairment and restaurant closure charges of $5.4 million.

Krispy Kreme said it anticipates filing its annual report for the year ended Feb. 3 on April 17. The company’s stock closed at $3.30 per share on Tuesday, and has traded between $2.23 per share and $11.49 per share in the past 52 weeks.