Quiznos has long been known for their hot subs and crazy commercials, but as the economy took a hit and consumer’s wallets tightened, Quiznos may soon be known for landing on a long list of bankrupt businesses from the recession. As of now, Quiznos is trying its best to restructure its debt to avoid filing for bankruptcy at all. This isn’t the first time Quiznos’ has found itself in a financial bind. In April of 2010 Quiznos received an injection of capital from one of its largest stockholders, which extended the terms of its debt and essentially cut the company some slack.
Unfortunately the influx of capital couldn’t sustain Quiznos for long and by the summer of 2012 the company sought out financial advisors to rework its finances. The Wall Street Journal reported back in July that Quiznos informed its lenders that its most recent quarter would come in below projection and that the economy was affecting sales more than they had expected.
Now Quiznos has approached its lenders in hopes of restructuring without filing for bankruptcy protection. So far its biggest creditor seems to be cooperating with the restructuring plan, which includes a new investment on their part. Avenue Capital has agreed to invest $75 million of new equity to Quiznos. While the investment will help Quiznos operating as usual, the creditor has also agreed to invest another $75 million in the conversion of debt to equity. The $150 million will of equity will eliminate a chunk of Quiznos staggering $875 million debt.
While the capital from Avenue Capital will allow Quiznos to continue operating, the company has said it will still need cooperation from its other lenders in the form of concessions from landlords, former executives and developers. As of now, its successfully reached agreements with 75.1% of its first-lien loan holders and 72.8% of its second-lien loan holders. The plan outlines that holders will be paid their $650 million in debt as well as $75 million in cash at the end of the new extended due date of five years. First-lien holders can swap about $200 million in loans for a new second-lien debt and the second-lien holders, holding nearly $225 million can exchange their loans for shares in the company once its reorganization.
Quiznos had about 3,500 stores across the U.S. and other countries but has closed about 1,500 in the past few years. Quiznos CEO assures customers and vendors that it will remain operating as usual and will honor its current contracts and obligations. If you’re considering filing for bankruptcy, please contact a Killeen or Waco bankruptcy lawyer as soon as possible to learn more about your options.