Fed cuts discount lending rate as markets remain volatile

NEW YORK —The Federal Reserve’s decision in mid-August to cut a key lending rate was welcome news for restaurant operators already battered by weeks of steep losses and subsequent recoveries in the financial markets.

The Fed cut by a half-percentage point its discount rate on loans to banks “to promote the restoration of orderly conditions in financial markets.” The discount rate does not have a direct impact on consumers and applies mostly to banks that are having short-term financial problems. —The Federal Reserve’s decision in mid-August to cut a key lending rate was welcome news for restaurant operators already battered by weeks of steep losses and subsequent recoveries in the financial markets.

“Financial-market conditions have deteriorated,” the Fed said in a statement, “and tighter credit conditions and increased uncertainty have the potential to restrain economic growth going forward.” —The Federal Reserve’s decision in mid-August to cut a key lending rate was welcome news for restaurant operators already battered by weeks of steep losses and subsequent recoveries in the financial markets.

For some operators, tightening credit and roiling markets have already had their impact. —The Federal Reserve’s decision in mid-August to cut a key lending rate was welcome news for restaurant operators already battered by weeks of steep losses and subsequent recoveries in the financial markets.

Seattle-based coffee bar operator Tully’s Coffee [3] Corp. said earlier this month that it had postponed its pending public stock offering because of “volatile stock market conditions.” —The Federal Reserve’s decision in mid-August to cut a key lending rate was welcome news for restaurant operators already battered by weeks of steep losses and subsequent recoveries in the financial markets.

Tully’s, operator or franchisor of about 131 units, said that proceeding with the offering, which was first announced in April, “would not be in the best interest of shareholders.” The company said it would continue to monitor the stock markets. Tully’s, which also is a wholesale coffee provider, had said it would use offering proceeds for growth of the business, repayment of debt and general corporate purposes. —The Federal Reserve’s decision in mid-August to cut a key lending rate was welcome news for restaurant operators already battered by weeks of steep losses and subsequent recoveries in the financial markets.

Also, at presstime Houston-based Landry’s Restaurants Inc. [4] still was battling in court with the trustee of its $400 million in notes, U.S. Bank, after the note holder had called all debt to be paid immediately. The move forced Landry’s to arrange a backup, refinanced credit facility at worse terms than it could have garnered in a better credit market, the company said, and if used, could lead to a $200 million loss in liquidity, according to published reports. —The Federal Reserve’s decision in mid-August to cut a key lending rate was welcome news for restaurant operators already battered by weeks of steep losses and subsequent recoveries in the financial markets.