Quiznos franchisees said Thursday they were eager to see resolution of a reported debt restructuring deal that would bring in new ownership for the beleaguered sandwich chain.
The Wall Street Journal reported Thursday that Quiznos’ largest lender is driving a plan to cut the chain’s more than $870 million debt load by about $281 million in a debt-for-equity swap with hedge fund Avenue Capital Group.
If approved by other creditors, the deal would give Avenue Capital a more than 70-percent ownership stake in the chain. The hedge fund is controlled by billionaire Marc Lasry, according to the report.
If creditors do not approve, however, the chain could face a prepackaged bankruptcy, according to unnamed sources in the Wall Street Journal report.
A spokeswoman for Quiznos on Thursday said the company had no comment on the reported details, but company officials earlier this year had confirmed a debt-for-equity swap was in the works, though no investor was identified.
According to Keith Rentschler, president of Quiznos’ Independent Franchise Association, or QZFA, Quiznos corporate officials had not confirmed any details from the Wall Street Journal account internally, but the news was encouraging.
“We, as the representatives of the QZFA, are actually excited to see the potential of this process moving forward,” Rentschler said. “Should the debt restructuring plan proceed as written to completion, we look forward to working with Mr. Lasry and his company.”
The Denver-based chain earlier this year hired law firm Paul Weiss Rifkind Wharton & Garrison LLP and investment firm Moelis & Co. to look at restructuring finances and operations.
Rentschler said franchisees within the system have been waiting for months to hear confirmation from the franchisor of the long-rumored debt restructuring.
The operates six Quiznos locations in the St. Louis, Mo., market, added that franchisees are keen to begin work with the franchisor on improving the sandwich brand’s business model and to ultimately create profitability for all involved.
“The business model that exists within the current system is, quite simply, unsustainable, and we have set our sights and energies as an association to concentrate on that basic principle,” he said.
Franchisee Kevin Tackett, past president of the association and operator of eight Quiznos units in Florida, agreed that the franchisee base is “beyond eager for this to be wrapped up so that we can get to the business of fixing the brand.”
Tackett added that “it is very difficult to get the current board to agree to or pay for anything with the change in ownership looming.
“We, the franchises, were told early on that it would all be resolved well before now,” Tackett added. “Many stores remain open only on the hope that it will get better soon, and many of them have run out of time, and money. We all just want it done.”
According to the Wall Street Journal, Quiznos’ current owners, private equity firm CCMP Capital Advisors LLC and Consumer Capital Partners, aren’t likely to get any recovery of their investment.
Under the deal, Avenue would invest $150 million that would be split between paying down senior debt and providing more working capital. Quiznos would use some of the money for a new marketing campaign, the report said.
The remaining $570 million in senior debt would remain in two trenches and come due in about five years.
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