News

Quiznos reaches deal to avoid bankruptcy

December 26, 2011

Quiznos has reached an agreement with a significant majority of its first- and second-lien lenders on a consensual financial restructuring plan that will substantially reduce the company's current debt and provide an infusion of $150 million of new equity capital to help position the brand for future growth.

The company expects to begin soliciting approval of the proposed transaction immediately.

The transaction provides for Avenue Capital, an investment firm that currently holds a significant amount of the company's first- and second-lien debt, to become the majority owner through the $150 million equity infusion and the conversion of debt to equity. Avenue's equity funding will be used to reinvest in the business and retire a portion of the company's first-lien debt.

Quiznos has entered into a restructuring support agreement with parties representing approximately 75.1 percent of its first-lien loans and 72.8 percent of its second-lien loans. The transaction provides for the restructuring of these loans and all of the equity interests in the company through either an out-of-court exchange offer or a prepackaged plan of reorganization under Chapter 11 of the United States Bankruptcy Code.

Under terms of the proposed exchange offer, the holders of approximately $650 million in first-lien loans will be repaid $75 million in cash and will extend the maturity of the balance of their loans until the five year anniversary of the closing of the restructuring.

The company would make a voluntary Chapter 11 filing only if it does not receive tenders from 100 percent of the first- and second-lien holders or does not satisfy other conditions to closing.

"We are pleased to have reached this agreement which will strengthen our balance sheet and allow us to strengthen our brand and customer experience," said Greg MacDonald, Quiznos CEO. "We appreciate the support that our lenders have shown for our team during this process. We would like to thank our franchise owners, employees and vendors who remain committed to providing high-quality, fresh ingredients and superior customer service."

The recapitalization will provide an opportunity to eliminate nearly $300 million, or about one-third, of Quiznos' current debt load, and will provide $75 million of new funding.

During the process, Quiznos will operate on a business-as-usual basis, and will honor all vendor obligations.

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