In an article published on June 30 in The Wall Street Journal, Larry Katz offers perspective on investment interest in bankrupt restaurants and retailers amid COVID-19.
While retailers struggle to attract interest from investors due to financial uncertainty that pre-dates the pandemic, investors are showing interest in acquiring restaurant companies out of bankruptcy, including chains that own casual-dining brands like Krystal, Logan’s Roadhouse, Gordon Biersch, Bar Louie, Brio and more.
Credit bids – where lenders buy a company and cancel the debt they are owed – have been a popular tactic to acquire these bankrupt restaurant chains. This approach allows the lender to put down little cash while assuming liabilities for the business. As Katz explains, there won’t be several parties vying for a company in today’s environment beyond the existing equity owners, senior lenders and landlords, and these parties stand to lose the most.
“You make the best of a bad situation, but who knows if it is going to work or not,” Katz said.
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Kristen M. Chatterton