CARPINTERIA Calif. Despite a tightening of the credit markets, CKE Restaurants Inc., parent of the Carl’s Jr. and Hardee’s quick-service brands, said late Monday that its lenders agreed to an increase of $100 million in its term loan, to a total of $270 million, at the same interest rate as the company’s current loan.
The company said it planned to use the proceeds to reduce the amount outstanding under its $200 million credit facility. Following the transaction, CKE said it would have $38.2 million of outstanding letters of credit and $8 million of outstanding borrowings, leaving $153.8 million available under the revolving line of credit.
“While the current difficulties in the credit markets have severely limited access to capital, our lender group agreed not only to double our term loan’s accordion feature to $100 million, but also agreed to loan us these additional funds at the same interest rate as our current term loan, which we negotiated in a much more favorable credit environment last January,” CKE president and chief executive Andrew F. Puzder said in a statement. The company’s accordion feature originally had allowed it to increase its term loan by $50 million without amending its credit facility and paying additional fees.
“Given current market conditions, we consider our lenders’ actions a very strong indication of their confidence in our financial strength and stability,” Puzder added.
CKE also said its lenders approved a $50 million increase in the amount the company is permitted to spend for share repurchases and cash dividends under its credit facility. CKE explained that under its credit facility terms it can use its revolving line of credit to repurchase shares and pay dividends, but must maintain a minimum of $25 million of liquidity. As of Aug. 27, CKE had utilized about $278 million of the $350 million authorized by its corporate board for share repurchases, leaving about $72 million for future buybacks.
CKE operates or franchises 3,022 restaurants under its two brands.