Steakhouse Chain Logan’s Roadhouse Files for Bankruptcy Protection
By LILLIAN RIZZO and PATRICK FITZGERALDSteakhouse Logan’s Roadhouse Inc. filed for bankruptcy protection Monday after striking a deal with it bondholders to swap more than $300 million in debt for control of the restaurant chain.
In a court filing, Keith Maib, chief restructuring officer of Logan’s parent LRI Holdings Inc., said Logan’s has reached a deal on the terms of a debt-for-equity swap with private-equity firm Kelso & Co. and one of its bondholders, Blackstone Group’s GSO Capital Partners LP.
New York-based Kelso acquired Logan’s parent company in a leveraged buyout valued at roughly $620 million, including debt, in 2010. Last year, Logan’s tried to alleviate some of the pressure of its debt load when it completed two exchanges of bonds for paid-in-kind notes with Kelso, as well as affiliates of Blackstone’s GSO unit.
The bankruptcy filing comes several months after the Nashville, Tenn., chain, which has 230 company-owned restaurants and 26 franchised locations, skipped an interest payment to bondholders.
Logan’s Roadhouse has seen its quarterly sales fall in recent years and has struggled to make interest payments.
The casual-dining sector, Mr. Maib said, has seen traffic decline by 3% over the past year as consumer preferences shift toward cheaper, faster alternatives. Buffets Restaurants, a Texas-based chain than 150 restaurants, filed for bankruptcy in March, and Pennsylvania’s Quaker Steak & Lube filed for bankruptcy in mid-November, with more than 50 locations throughout the U.S.
Despite a recent uptick in the overall economy Mr. Maib said Logan’s Roadhouse has continued to under perform. In the first half of this year, he said, the chain’s customer traffic is down 8.77% and restaurant sales are down 3.95%. The company lost $112 million last year on revenue of $606.4 million.
Faced with falling sales and looming debt payments, Logan’s Roadhouse earlier this year launched talks with lenders on the terms of a debt restructuring.
The company listed assets of $347.2 million and debts of $546.1 million in court papers. Lenders are providing Logan’s Roadhouse with a $25 million bankruptcy loan so the restaurants can remain open during the bankruptcy. The company is also seeking court approval to pay its 18,964 workers and its vendors during the restructuring.
As part of the restructuring, Logan’s Roadhouse said it is closing 18 underperforming restaurants. Chief Executive Sam Borgese is also leaving the company.
Logan’s will seek court approval to use up to $10 million of its proposed $25 million bankruptcy financing package. The bankruptcy loan being provided by Carl Marks Management Co., Marblegate Asset Management LLC, GSO, and Kelso.
Judge Brendan Linehan Shannon has scheduled a hearing Tuesday in Wilmington, Del., to consider approval of Logan’s bid to tap its bankruptcy loan along with the restaurant chain’s other requests.
Write to Lillian Rizzo at Lillian.Rizzo@wsj.com and Patrick Fitzgerald atpatrick.fitzgerald@wsj.com