Melville-based quick-service food chain Sbarro Inc. has negotiated another month to figure out how to restructure and emerge from its heavy debt load.
Sbarro won a second forbearance period with its lenders and now has until March 2 before lenders can take action against the company for defaulting on its loan agreement, according to documents the company filed with the Securities and Exchange Commission. The company said it owes a total of $207,265,214 to first- and second-lien lenders, documents stated.
As part of the agreement, Sbarro, which did not make a Feb. 1 interest payment of about $7.8 million, said that it has paid a forbearance fee of $274,456. The outstanding loans now will bear interest at the default rate and result in $860,000 of incremental interest in the first quarter, the documents said.
The forbearance terms also require the company to maintain a minimum level of liquidity and provide a restructuring proposal to lenders.
Last month, Standard & Poor's released a report that lowered the company's credit rating from CCC- to CC -, a grade designating the company as "highly vulnerable."
"The ratings on Sbarro reflect Standard & Poor's belief that the company's current capital structure is unsustainable and that it is unable to service its existing debt," the report stated.
In addition to being "highly leveraged," Sbarro said it was facing increasing commodity costs, particularly for cheese and flour in its third-quarter report. The company pointed to a number of factors that raised "substantial doubt regarding the company's ability to continue as a going concern," including its pressing large debt payments, low cash on hand, general economic uncertainty and no available means to refinance debt.
Sbarro Inc., which originated as a family-based business in Brooklyn in 1956, was acquired by MidOcean Partners, a Manhattan private equity firm, in 2007. Its headquarters remained in Melville.
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