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DENVER – Sources close to Quiznos management operation tell Blue MauMau that the board of directors of owner Avenue Capital Group were at Denver headquarters yesterday trying to work out another restructuring deal for the troubled sub sandwich chain. They have been told that Quiznos is alleged to be down to a few million dollars of operating capital.
One source said the parties were unable to work out solution and agreed to let the bankruptcy court take the matter over.
Debtwire, an intelligence service that reports on corporate debt situations before credit ratings are downgraded, issued a report on the current situation. It stated that Quiznos first lien lenders have retained financial advisor Houlihan Lokey to try and fix its “over-levered balance sheet,” information they received from two sources. The sub sandwich chain’s second lien lenders have engaged Rothschild. Debtwire’s sources explain, “ . . . to clear the way for the workout talks, the issuer has extended its forbearance into February.”
The forbearance agreement with lenders was secured at the end of 2013, to cure a default resulting from the non-payment of loan payments due in December. Debtwire stated that Quiznos opted to skip the payments following “consecutive quarters of earnings declines despite the company completing an out-of-court restructuring in early 2012.”
Quiznos owner Avenue Capital brought in Lazard and Akin Gump advisors last year to help with chain with its ongoing earnings problems. The firms had assisted Avenue Capital during its 2012 restructuring when the investment firm held the position of term loan lender in the restaurant credit. Going through the process, Avenue equitized its stake in the loan debt and provided $150 million equity infusion to become the new majority owner.
Debtwire stated that Quiznos, Houlihan and Rothschild did not return calls seeking comment for their report.
Quiznos has gone from its peak of over 5,000 stores in 2006 to 1,200, possibly much less. The company has been sued by numerous franchisees, alleging Quiznos concocted a scheme to defraud them. Most blame the company’s high markups on food and other products they were required to buy as the culprit that forced many to close their stores.