Einstein Noah completes strategic review, recapitalizes existing debt

Einstein Noah completes strategic review, recapitalizes existing debt

Company decided that a sale or merger is not in its shareholders' best interest

Einstein Noah Restaurant Group Inc. said Thursday it has recapitalized its existing loan and declared a one-time shareholder dividend of $4 per share, bringing to a close a review of strategic alternatives that had included a possible sale or merger.

The Lakewood, Colo.-based parent to the Einstein Bros Bagels, Noah’s New York Bagels and Manhattan Bagels brands announced in May that it had hired Piper Jaffray as financial advisor to explore various options to maximize value for stockholders. 

The recapitalization announced Thursday includes the amendment and restatement of its existing senior credit facility, increasing a term loan from $75 million to $100 and a revolving credit facility from $50 million to $75 million. The maturity date is also extended from December 2015 to December 2017. 

Proceeds will be used to fund a one-time dividend to shareholders of $4 per share — or about $68 million in aggregate — as well as the ongoing quarterly dividend, working capital, capital expenditures and other corporate purposes.

Nelson Heumann, chairman of Einstein Noah’s board, said the announcement marked an important milestone for the company. “We are pleased to have been able to recapitalize the business through our existing bank facility on such favorable terms and maintain modest leverage,” he said. “We view this one-time special dividend as a clear demonstration of our commitment to returning capital to shareholders, as well as our confidence in the strong results and momentum of the business.”

In October, Einstein Noah said it was seeking a $240 million first lien term loan and a $25 million revolving credit facility for a total of $265 million, which was about 4.5 times adjusted earnings before interest, taxes, depreciation and amortization, or EBITDA, of $53 million.

Over the past year, Einstein Noah has recorded steady improvements, cutting costs and driving traffic with menu changes, such as the addition of a more-healthful Smart Choices platform based on the popular Bagel Thin line, new specialty beverage offerings, value-focused bundling and an enhanced loyalty program. The company has also been growing its catering business with the help of a new ordering system, an expanded call center and better packaging.

For the company’s Oct. 2-ended third quarter, Einstein Noah reported net income of $3.4 million, or 20 cents per share, compared with $2.8 million, or 17 cents per share, a year ago. Revenues increased nearly 2 percent to $105.5 million on systemwide same-store sales that rose 0.2 percent.

Certain officers were also rewarded for their retention during the strategic review process, including president and chief executive Jeffrey O’Neill, who earned a cash bonus of $225,000, according to filings with the Securities and Exchange Commission.

Chief financial officer Emanuel Hilario earned $200,000; chief legal officer and secretary Rhonda Parish earned $135,000 and chief restaurant officer Brian Unger earned $60,000.

Contact Lisa Jennings at [email protected] [6]

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