TAKEAWAYS (Restaurants)

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Per Jonathan Maze of Restaurant News, this is the latest and greatest restaurant investment thesis: "[p]roblems in other consumer sectors are worse." So, yeah, people are clamoring to invest in restaurants, it seems, because it REALLY SUCKS MORE elsewhere. We love this, "The contrast between the restaurant industry deal flow and industry traffic was not lost on many experts. Same-store traffic has fallen 27 of the past 29 months, according to the monthly restaurant index MillerPulse." But, whatevs. Let's compete with a bazillion others, price inflate, and hope and pray we can find some other sucker on the backend - provided, of course, the macroeconomic environment affords opportunity for a "backend." Surefire strategy. Those takeaways emanated out of the Restaurant Finance & Development Conference in Las Vegas, which we had neither the time nor the funds to attend. And so we outsourced. We asked Navin Nagrani, Executive Vice President at Hilco Real Estate, for his thoughts on the conference considering he sat on a panel there. Here's what he reported back: 

  • "More lenders and private equity groups than ever. Most folks are hungry to do deals."
  • "Definite stress in the casual dining segment."
  • "Lots of chatter about fast casual being the next wave of distress."
  • "Usual conjecture on [A]mazon."
  • "Saw more activists attend this conference than before."

Casual Dining Continue to Take a Beating $IRG

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Ignite Restaurant Group (see profile below) - owner of the Joe's Crab Shack and Brick House Tavern + Tap - is the latest victim of the trends befalling the casual dining segment. That said, this story is a bit more complex than that and the bankruptcy seems to be the result of a perfect storm of poor acquisitions, poor execution and hubris. Oh, and private equity once again getting the upper hand - here, Golden Gate Capital dumping the Macaroni Grill dog before it's brand value diminished even farther than it already had. Now Kelly Investment Group is looking to buy the company for a fraction of the company's secured debt. Ouch. Notably, KIG also purchased Last Call Operating Co. (owner ofChampps and Fox & Hound) out of bankruptcy last year.

What the Pros Say (Week of 12/11/16)

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Featured:

  • Ignoring the podcast host's painful lack of charisma, Pachulski's Jeffrey Pomerantz provides an intriguing interview about the state of retail; he discusses macroeconomic trends, e-commerce trends, and the pros/cons of selling a retail asset pursuant to 363 or a plan (i.e., net operating loss benefits); he also draws on experience from Radio Shack, Wet Seal, Pac Sun and Delia's. Finally, he indicates that "there are rumors that Dick's Sporting Goods has hired Houlihan Lokey to pursue restructuring alternatives" and highlights Sears, Forever 21 and Claire's Stores as potential near term bankruptcy candidates. He forgot to mention J. Crew. 

Jones Day LLP has a lot to say...

  • 2017. Deloitte CRG's Kirk Blair predicts restructuring activity in...wait for it...energy, shipping and retail. Really going out on a limb.
  • Aeropostale. Jones Day LLP's Brad Erens summarizes the stinging defeat the company took in its efforts to equitably subordinate and/or recharacterize Sycamore Partners' claims (and limit credit bidding rights).
  • Avoidance Actions. A limited expansion of the lookback period as noted by Jones Day LLP's Amanda Parra Criste.
  • Chapter 15. Verle Roovers of Jones Day LLP provides an analysis of recent Chapter 15 precedent (Sanjel).
  • Consumer Privacy. John Drennan of Baker Donelson discusses a critical issue.
  • Equitable Mootness. G. Christopher Meyer of Squire Patton Boggs (US) LLP discusses the doctrine in the context of Detroit's Chapter 9 appeal (spoiler alert: still equitably moot).
  • Indenture Trustee Standing. Andrew Silfen, Leah Eisenberg, Jeffrey Rothleder and Jordana Renert of Arent Fox LLP collaborated on a summary of a recent NY Supreme Court decision.
  • Jevic - Structured Dismissals. Mark Salzberg from Squire Pattong Boggs LLP discusses the SCOTUS deliberations.
  • Makewhole. Simpson Thatcher is a little late to the EFIH-summary party but this is a solid memorandum by John Lobrano, Sandy Qusba, Elisha Graff and Morris Massel discussing the recent 3rd Circuit decision. As is Arent Fox LLP's summary by Andrew Silfen, Jeffrey Rothleder and Beth Brownstein here.
  • Midstream Contracts. Kathryn Coleman and Anson Frelinghuysen of Hughes Hubbard & Reed LLP provide a summary of the March SDNY decision in Sabine that still rankles Judge Jones in Texas to this day.
  • Restaurants. Edward Neiger of ASK LLP summarizes a few of the recent casual restaurant filings. We have also covered this space in here.