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Public companies are disclosing that they are firming their cash positions to deal with a shattered consumer market because of the novel coronavirus pandemic.

Restaurant companies stockpile cash to survive coronavirus

Brands from Darden to Bloomin’ and Dine to Ruth’s draw on credit facilities to weather crisis

Restaurant companies are tapping into their credit facilities and drawing down their credit revolvers to husband cash for what looks to be an extended impact from the coronavirus pandemic.

To ensure liquidity in challenging times, public companies are disclosing that they are firming their cash positions to deal with a shattered consumer market because of the novel coronavirus pandemic.

On Thursday, Orlando, Fla.-based Darden Restaurants Inc., parent to the Olive Garden and LongHorn Steakhouse chains among others, said it was suspending its quarterly dividend and fully drawing on its $750 credit facility to have $1 billion in cash on hand as it saw same-store sales drop as much as 60% this week. States and municipalities were closing dining rooms.

"We believe this positions us well,” said Ricardo Cardenas, Darden’s chief financial officer, “to deal with potential near-term volatility under the current market conditions."

Analysts agreed. “[Darden] appears to have the financial wherewithal to come out on the other end assuming a gradual recovery in sales,” said Andy Barish, an analyst with Jefferies, in a note Thursday.

Tampa, Fla.-based Bloomin’ Brands Inc., parent to the Outback Steakhouse and Carrabba’s Italian Grill among others, said that because of “current unprecedented global market and economic conditions, the company is withdrawing its financial guidance for the fiscal year ending Dec. 27, 2020.” Its board also suspended the quarterly dividend.

Bloomin’ said it had increased its cash reserves.

“The company has a cash position of over $400 million after drawing down substantially all of its revolving credit facility,” Bloomin’ said. “The increased borrowings were taken as a precautionary measure to provide additional financial flexibility.”

 “In addition to expanding our growing carry-out and delivery business, we have taken actions to tightly manage costs in this new environment,” said Chris Meyer, Bloomin’ chief financial officer, in a statement. “These actions, combined with our strong cash reserves, address near-term volatility under current market conditions.” Bloomin’ has more than 1,450 restaurants, including the Bonefish Grill and Fleming’s Prime Steakhouse & Wine Bar.

Glendale, Calif.-based Dine Brands Global Inc., the parent to the Applebee's Neighborhood Grill & Bar and IHOP restaurants, said Thursday that it had drawn down about $223 million of the $225 million available under its revolving financing facility.

 “Although Dine Brands does not have an immediate need for additional liquidity, precautionary steps were taken to increase the company’s financial flexibility in light of unprecedented conditions due to the COVID-19 outbreak,” the company said in a statement. “The proceeds will be used for general corporate purposes.” Dine has more than 3,600 restaurants in 17 countries.

Winter Park, Fla.-based Ruth's Hospitality Group Inc. earlier this week said it was increasing the borrowings under its revolving credit facility “in order to increase its cash position and preserve financial flexibility in light of current uncertainty in the global markets resulting from the COVID-19 outbreak.”

On Monday, Ruth’s Hospitality said it alerted lenders it would borrow to the total of its $120 million revolving credit facility. As of Dec. 29, the company had $64 million of outstanding indebtedness under the facility with about $51.2 million of borrowings available, less outstanding letters of credit of about $4.8 million.

Ruth's has more than 150 Ruth’s Chris Steak House locations worldwide.

Other foodservice operations were taking similar steps.

Philadelphia-based Aramark, which provided foodservice at a variety of facilities, acknowledged that COVID-19 had changed its markets.

John Zillmer, Aramark’s CEO, said in a statement: “We are well-positioned to navigate the uncertainty of the current environment due to our strong liquidity position, highly flexible, low fixed-cost operating model, as well as our diversified client portfolio and geographic mix.” The company operates in 19 countries.

Aramark said it expected revenue would decline 15% to 20%.

“The company has a strong balance sheet with solid financial flexibility and no significant debt maturities due until 2023,” Aramark said. “Liquidity remains strong and in order to maintain maximum flexibility, the company has decided to fully draw down on its revolver, increasing cash availability to $1.3 billion. The company also has flexibility to optimize working capital and defer capital expenditures as appropriate without material impact.”

Contact Ron Ruggless at [email protected]

Follow Twitter: @RonRuggless

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