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Denny’s Corp. has refinanced its $350 million revolving credit facility to a new five-year $400 million revolver.

Denny’s refinances credit facility, relaunches share repurchase program

Family-dining brand’s CFO Robert Verostek explains what’s behind the financial moves

Denny’s Corp. has refinanced its $350 million revolving credit facility to a new five-year $400 million revolver and relaunched its stock repurchasing program, the company said Thursday.

The Spartanburg, S.C.-based family-dining brand’s board approved a new multi-year share repurchase program authorizing the repurchase of an additional $200 million of its common stock,

Borrowings under the new credit facility will bear a tiered interest rate, which is based on the company’s consolidated leverage ratio. Based on a current outstanding balance of $170 million, the interest rate is initially set at LIBOR, or the London Interbank Offered Rate, plus 225 basis points, representing a 75 basis point reduction in the credit spread at the current consolidated leverage ratio, the company said.

For the second quarter ended June 30, Denny’s narrowed its loss to $828,000, or 1 cent a share, from $23 million, or 41 cents a share, in the same period last year. Revenues increased to $106.2 million from $40.2 million in the prior-year quarter.

As of June 30, Denny's had 1,645 franchised, licensed and company restaurants around the world including 149 restaurants abroad.


Denny's-CFO-Robert-Verostek.jpgRobert Verostek, left, Denny’s chief financial officer, discussed the financial moves with Nation’s Restaurant News:

Emerging from the pandemic, how are the credit markets approaching restaurant company-refinancing generally?

We believe lending terms are beginning to improve as restaurant companies demonstrate improving trends and a return toward pre-pandemic fundamentals through the recovery.  We are pleased to announce a successful refinance with favorable terms that validate the fact that our brand not only survived the pandemic but is now financially equipped to thrive on the other side.

How does this period compare historically?

With our previous refinance in October of 2017, we were able to expand our borrowing capacity from $325 million to $400 million and announce a $200 million share repurchase authorization, our largest authorization to date.  We were very pleased with that outcome in 2017 on the heels of six years of consistently positive annual same-store sales growth (2010 through 2016).

This new credit facility is an expansion in borrowing capacity from $350 million, under the latest credit amendments secured during the pandemic, to $400 million once again.  At the same time, we are relaunching share repurchases with an even larger multi-year authorization in place at $248 million.  This is a particularly positive outcome considering the challenges we have faced over the last 18 months as a large franchised full-service brand.  It truly is a testament to the durability of our brand, the ingenuity and passion of our franchise partners, the tenure and depth of our management team, and the strength of our business model.  We are grateful for the confidence the financial market has placed in us.

How does this refinancing impact Denny’s in the near-term and long term?

In the near term, the refinancing allows us to return capital to our shareholders and make capital investments in our brand that were restricted with recent credit amendments.  With those constraints lifted, we can return to our share repurchase program and make appropriate investments with the goal of elevating our brand and enhancing long-term shareholder value.

In the long term, this refinance extends the maturity of our credit facility by an additional five years and provides the flexibility needed to support future brand growth and shareholder value creation.

How did the pandemic affect Denny’s established share repurchase program? And how does this refinancing affect that?

As dine-in restrictions and stay-at-home directives were imposed by various states, we quickly transitioned to focus of capital preservation — like many peers.  As a consequence, we voluntarily suspended share repurchases in mid-March of 2020.  In connection with covenant relief secured through amendments in the back half of 2020, we were precluded from returning capital to shareholders through early November of this year.  We are delighted this refinance allows us to return to our practice of share repurchases ahead of schedule.

What is most professionally satisfying about this refinancing?

The enduring strength of our brand rests on relationships.  That includes the relationships we foster with our guests, our franchise partners, our vendors, our shareholders, and our lenders.  I appreciate the way in which our brand functions and the importance we place on communication with all of our stakeholders.  This refinance is the culmination of a tremendous effort by so many individuals working in concert together.  It is a representation of our collaborative culture that will ensure Denny’s continues to thrive going forward.

Contact Ron Ruggless at [email protected]

Follow him on Twitter: @RonRuggless

TAGS: Finance
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