Seeking to stave off creditors to whom it owes nearly $600 million, Quiznos, a sandwich chain that peaked in popularity in 2008 with its toasted subs, is now seeking to restructure its debt load for the second time in as many years.
The Denver-based chain recently missed a payment on a loan, hired bankers and lawyers and began negotiations to restructure some or all of its debt, according to a report in the Wall Street Journal.
Buying for time
The negotiations with creditors are designed to provide Quiznos a valuable commodity: time. Quiznos Chief Executive Stuart Mathis is using the time to work out a new forbearance agreement with creditors, according to a memo reviewed by the Wall Street Journal.
“We have reached an agreement with our lenders and equity partners, and look forward to continuing to work constructively together to establish a framework that will position Quiznos and our franchisees for future growth and success,” Quiznos said.
Struggling to catch the spark
Quiznos is struggling to catch the spark that once launched it to be the bell of the ball, when it was one of the few legitimate competitors to Subway. With 5,000 Quiznos stores in 2008, the now beleaguered chain has shrunk to 2,100 stores today as it struggles to compete. Boston-based Subway, with 41,000 stores nationwide, is the low priced competition. Higher end stores, such as Chicago-based Potbelly, which recently raised more than $100 million in an IPO, has added 100 stores recently, bringing the total to 300, according to the report.
Quiznos’ restructuring deal
Nearly a year ago Quiznos agreed to an out-of-court restructuring deal with creditors, cutting its debt by more than a third to approximately $570 million and resulted in investment firm Avenue Capital Group taking majority ownership, according to the report. At the time the CEO said he would attract new franchises, but the number of stores fell nearly 30% over the time. The turnaround hasn’t met benchmarks and investors in Quiznos debt are hoping they can reach an out of court agreement that doesn’t involve bankruptcy.