Real Mex Restaurants Inc., the parent to the Chevys, El Torito and Acapulco brands, said the company has reached an agreement with lenders to waive and amend certain debt covenants as the company restructures.
After reporting first-quarter earnings in May, the company said it was negotiating with lenders to amend borrowing terms and agreements. At the time there was a possibility that notes and senior secured revolving credit facilities would not be met as of late June.
On Thursday, however, the company said it had made a $9.1 million interest payment, and that an affiliate of private-equity owner Sun Capital Partners had provided additional liquidity as part of the ongoing restructuring process. The amount was not disclosed.
In a statement, the company said all financial stakeholders are working together on a revised capital structure that recognizes the economic realities and addresses future needs.
“Our core business continues to improve and the operating performance of our restaurant brands is making strong progress under new leadership,” said David Goronkin, Real Mex chair and chief executive, who joined the Cypress, Calif.-based company in June.
“Although our company continues to generate substantial earnings, the current capital structure, certain above-market leases and the soft economy slow our headway,” he said. “By addressing these issues now, we’ll be able to move forward more quickly.”
However, the company on Friday said it could offer no further detail on plans ahead, except to add in a separate statement, “We are working hard to maximize the value of our company, which continues to generate substantial earnings, and build a strong platform for the future.”
Goronkin, who was previously president and chief executive of Bennigan’s Franchising Co., replaced Richard Rivera, who stepped down in April after two years as chair and chief executive of Real Mex.
Real Mex operates 177 domestic restaurants under the Chevys Fresh Mex, El Torito, Sinigual and Acapulco Mexican Restaurants Y Cantina brands, and another 22 Chevys are franchised or licensed. Additionally, the company licenses eight international El Torito locations.
Also among Real Mex restaurants are small regional brands or one-unit locations under the Las Brisas, Casa Gallardo, El Paso Cantina and Who-Song & Larry’s brands.
The company also owns Real Mex Foods Inc., a manufacturing subsidiary that makes branded products for its restaurants and other brands.
In recent years, Real Mex has struggled against economic headwinds, especially in the chains’ core market of California where the majority of the company’s restaurants are located.
For the March 27-ended quarter, Real Mex reported a loss of $5.4 million, compared with a loss of $4.6 million in the same quarter a year ago.
Revenue declined by 3.5 percent to $116.2 million for the quarter, which was primarily due to a $4 million drop in restaurant sales. The company had five fewer restaurants open in the first quarter compared with the same time a year ago.
First quarter same-store sales across all brands fell 1.6 percent, which was blamed primarily on a 3.8-percent reduction in guest counts that was partially offset by a 2.3-percent increase in average check.
According to the St. Louis Post-Dispatch, the franchise owner of seven Chevys locations filed Chapter 11 bankruptcy protection on July 21.
O’Fallon, Ill.-based T&J Restaurants reportedly planned to close two locations, one of which closed earlier this week, leaving six for which the company would seek lease negotiations and continue operations.