CALABASAS HILLS Calif. The Cheesecake Factory Inc. amended the terms of its $300 million credit facility to gain more financial flexibility, it said this week.
The changes included higher interest rates, but looser covenants.
The company’s five-year facility still remains due in 2012, and as of Dec. 30, Cheesecake Factory said it had an outstanding balance of $275 million under the facility, standby letters of credit of $16 million and net availability for borrowings of $9.0 million.
Under the amended terms the company’s interest rate rose to 2.75 percent above the London interbank offer rate, or LIBOR, from previous pricing of 1 percent above LIBOR. The company’s fixed charge covenant, which looks at profit prior to certain taxes and interest payments, was loosened. Its leverage covenant, which looks at total funded debt and profit, became more stringent, however.
“Given our reduced development plans for fiscal 2009, as well as a healthy level of cash flow that we anticipate our restaurants will generate next year, we should be well positioned to increase the amount of cash on our balance sheet and/or reduce our debt level,” said David Overton, Cheesecake Factory’s chairman and chief executive.
Securities analyst Larry Miller at RBC Capital Markets Corp. said the increased interest expense would reduce the company’s per-share earnings, but that a focus on reducing debt will help the company remain compliant with lending arrangements and to fund future share repurchases. Under the new credit facility terms, Cheesecake Factory can only begin share repurchases when it hits a minimum liquidity level of $125 million and a certain leverage ratio.
The company operates about 145 namesake casual-dining restaurants, 13 Grand Lux Cafe locations and one RockSugar Pan Asian Kitchen restaurant. For its latest quarter, ended in September, profit fell 36.4 percent to $11.8 million, or 19 cents per share. Corporate revenues rose nearly 8 percent to $405.1 million, but same-store sales fell 4.7 percent at The Cheesecake Factory and 5.1 percent at Grand Lux.
