WSJ -- Krispy Kreme Nears a Deal For $225 Million in Financing ...............
March 28, 2005 1:31 p.m.
Krispy Kreme Nears a Deal For $225 Million in Financing
By MARK MAREMONT
Staff Reporter of THE WALL STREET JOURNAL
Krispy Kreme Doughnuts Inc. is close to an agreement to secure $225 million in new financing from a group that includes Silver Point Capital LP and Credit Suisse First Boston, according to a person close to the situation.
An announcement on any deal could come as soon as this week, this person said.
Silver Point, Greenwich, Conn., is one of a number of hedge funds that lend money to companies in distress, typically with senior debt that is secured and ranks above others if the borrower ends up filing for bankruptcy protection. In regulatory filings, it lists two of its partners as Edward A. Mule and Robert J. O'Shea.
Spokespeople for Silver Point and CSFB said they had no immediate comment.
Krispy Kreme on Friday said its existing lenders had agreed to extend to April 11 a deadline for filing overdue financial statements. It also said it was in talks with an unnamed new lending group to secure funds to repay the old lending consortium, but cautioned there could be no assurance it would secure the new financing.
Krispy Kreme, based in Winston-Salem, N.C., has been unable to file financial statements for the quarter ended Oct. 31, 2004, putting in it into technical default on a $150 million credit line from its banks, which include Wachovia Corp., B&T Corp., Bank of America Corp. and Royal Bank of Canada.
News of the proposed new lending arrangement involving Silver Point and CSFB was first reported by Debtwire, a news service that focuses on distressed and high-yield debt.
Although a new lending agreement could help Krispy Kreme's liquidity, its long-term future remains murky. Once a high-flier, the doughnut retailer has been struggling in recent months with slowing sales, restive franchisees and multiple probes into its accounting practices. The company in January ousted its longtime chief executive, Scott Livengood, replacing him with Stephen F. Cooper, a restructuring expert who also serves as acting CEO of Enron Corp.
Some troubled companies in which Silver Point has been involved later filed for bankruptcy protection, including Tower Automotive Inc. (See correction below.)
In addition to paying off its existing bank line, Krispy Kreme said it plans to use its proposed new financing for "general corporate purposes." It didn't specify those, but the company is likely to shrink from its current base of about 400 stores, and faces the need to pay off costly leases that it took on during its aggressive expansion.
Write to Mark Maremont at mark.maremont@wsj.com
Corrections & Amplifications:
Silver Point Capital LP bought Tower Automotive debt in the secondary market before that company filed for bankruptcy protection, according to a spokeswoman for Silver Point. An earlier version of this story wrongly implied that Silver Point lent money to Tower ahead of its bankruptcy.
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