Industry News | January 25, 2012

Quiznos Restructures to Avoid Bankruptcy

Quiznos completed its previously announced financial restructuring on an out-of-court basis, helping the company avoid bankruptcy.

The agreement eliminates one-third – or about $300 million – of the company's outstanding debt, and provides a significant infusion of $150 million in new equity from Avenue Capital Group, a global investment firm, to position Quiznos for future growth.

"Improving our balance sheet and putting our capital structure issues behind us are major steps forward to strengthening the Quiznos brand and our customer experience," says Greg MacDonald, Quiznos CEO.

"We look forward to working alongside the Avenue Capital Group team and appreciate the support of all of our lenders during this restructuring process. Along with our dedicated franchise owners and employees, we can now focus primarily on the customer experience and our fresh, high-quality products. This is an exciting time for all of us here."

Following the successful closing of an exchange offer launched by Quiznos on December 23, 2011, Avenue Capital Group has become the majority owner of the Company through its $150 million equity infusion and the conversion of its debt to equity.

Marc Lasry, CEO of Avenue Capital Group, says, "We are excited to be part of the Quiznos team and look forward to partnering with management in the weeks and months ahead."

One hundred percent of the aggregate principal amount of the first- and second-lien loans were tendered in the exchange offer.

The holders of approximately $650 million in first-lien loans were repaid $75 million in cash and the maturity of the balance of their loans was extended until the five-year anniversary of the closing.

Certain lenders also exchanged approximately $150 million of their existing first-lien loans for new second-lien loans, and holders of approximately $225 million of second-lien loans exchanged their loans for a pro rata share of 40 percent of the new equity of the recapitalized Quiznos.

In addition, the Company received significant concessions from certain other creditors and stakeholders. 

Former equity owners Consumer Capital Partners facilitated the restructuring process and provided certain concessions to allow the restructuring to be completed out of court.  

Quiznos' financial advisor for the restructuring was Moelis & Company and its legal advisor was Paul, Weiss, Rifkind, Wharton & Garrison L.L.P.  Vinson & Elkins L.L.P acted as the company's financing counsel.  The financial advisor for Avenue Capital and certain other lenders was Lazard and the legal advisor was Akin Gump Strauss Hauer & Feld LLP.  The financial advisor for first-lien lenders was Blackstone Advisory Partners L.P. and the legal advisor was Willkie Farr & Gallagher LLP.

Now in its 30th year, Denver-based Quiznos is a national chain designed for today's busy consumers who are looking for a tasty, freshly prepared alternative to traditional fast-food restaurants. Using premium ingredients, Quiznos restaurants offer creative, chef-inspired recipes for sandwiches, soups and salads.

Avenue Capital Group is a global investment firm focused on undervalued opportunities in the private and public debt, equity and real estate markets in the U.S., Europe and Asia.  The firm is headquartered in New York, with offices in London, Luxembourg and Munich, and five offices throughout Asia.

This press release contains "forward-looking statements," within the meaning of the federal securities laws that involve risks and uncertainties. All statements herein that address activities, events, conditions or developments that the Company expects or anticipates will or may occur in the future are generally forward-looking statements.

These forward-looking statements involve known and unknown risks, uncertainties and other factors that may cause the actual results, performance, achievements or transactions of the Company and its affiliates to be materially different from any future results, performance, achievements or transactions expressed or implied by such forward-looking statements. The Company undertakes no obligation to update or revise any forward-looking statements, whether as a result of new information, future events or otherwise.

Comments

Quote from article... "Along with our dedicated franchise owners and employees, we can now focus primarily on the customer experience and our fresh, high-quality products. This is an exciting time for all of us here."From the above quote - I do hope the franchises focus on Customer Service - not just "lip service". The product is fresh, but it seems that the employees are so worried of their cost to make a sandwich. I will give it another shot in 6 months to see if there was any truth to this article.Good Luck

I hope with all the changes that we as owners can develope a "Food Co-Op" to create some transparancies that are NOT available now. American Food Distibutors(owned by Rick Schaden) are a contributor to high food costs. Going forward we should be rid of this entity so costs are lowered. Recently all meats, cheeses and dressings were increased which does not help our cause.

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