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Buffets Inc. Launches Second Leveraged Recapitalization in Two Years

Strategic Insights

— 1 min read

Buffets Inc., a restaurant chain operator, has completed its second leveraged recapitalization in two years, allowing its private equity backers, Caxton-Iseman Capital Inc. and Sentinel Capital Partners, to collect a significant dividend. The latest move will more than double their investment in the company in just over three years. The recapitalization was supported by a $310 million secured bank debt syndication and a $177 million high-yield note offering, which will allow Buffets to pay a $114 million dividend to its shareholders.

Key Takeaways:

  • Buffets Inc. has launched its second leveraged recapitalization in two years, with a $310 million secured bank debt syndication and a $177 million high-yield note offering.
  • The recapitalization will allow the company to pay a $114 million dividend to its shareholders, with Caxton-Iseman Capital Inc. set to receive the lion's share of the dividend distribution.
  • Caxton-Iseman Capital Inc. and Sentinel Capital Partners have invested a total of $121 million of equity in the company and will take out a total of $256 million after the latest payout.
  • The company, founded in 1983 by Roe Hatlen and C. Dennis Scott, has grown to encompass more than 400 restaurants under the Old Country Buffet, HomeTown Buffet, and Tahoe Joe's names.
  • Moody's Investors Service assigned a B1 rating to the bank loan and a Caa1 rating to the high-yield offering, reflecting the company's high leverage post-recap.
  • The company has achieved operating efficiencies and has offset volatile commodity food costs by emphasizing different menu offerings.

Statistics:

  • $310 million: Amount of secured bank debt syndication
  • $177 million: Amount of high-yield note offering
  • $114 million: Amount of dividend to be paid to shareholders
  • 400+: Number of restaurants operated by Buffets Inc.
  • 77%: Percentage of common stake held by Caxton-Iseman Capital Inc.
  • 6.9%: Percentage of common stake held by Sentinel Capital Partners
  • 30%: Time period in which the company's investment will more than double

Sources:

  • "Buffets Inc. Completes $487M Leveraged Recapitalization" by TheDeal, January 28, 2003
  • "Buffets Inc. Rating Indicates Resilience in Economic Downturn" by Moody's Investors Service, February 2003
  • "Caxton-Iseman Executive Hints at Potential for Future Cash Harvests from Buffets Inc." by TheDeal, June 2002

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