PF Chang’s Debt Extension Deal May Lift Junk Rating
(Bloomberg) -- Restaurant chain PF Chang’s China Bistro Inc. wants to ease short-term debt pressures by extending the maturity of a loan due in 2026, a move that could help improve its credit rating.
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Its proposed $480 million amend-and-extend transaction would push the maturity of its existing term loan by more than three years, to September 2029 from March 2026.
The Asian fusion bistro chain, which operates under the umbrella of Wok Holdings Inc., held a lender call on Monday, according to a person with knowledge of the matter. Initial pricing discussions on the loan is for 6.25 percentage points above the benchmark rate and a discounted price of 96 cents on the dollar, the person said. Commitments are due on Thursday.
That equates to an annual yield of about 11%, according to a Bloomberg calculation.
Scottsdale, Arizona-based PF Chang’s was also expected to receive a new $30 million revolving credit facility to refinance its $51.25 million revolving credit facility, according to an S&P Global Ratings report from Dec. 4. The new revolver would extend maturity to March 2029 from Sept. 2025, S&P said.
If successful, the refinancings may lead S&P Global Ratings to upgrade Wok Holdings by one notch, the firm said in a report. S&P currently rates the issuer ‘CCC+,’ which is firmly in junk.
PF Chang’s is part of the casual dining sector, which has been under strain recently due to unfavorable consumer spending trends and increased competition from other types of restaurants. Recent bankruptcies of large chains include TGI Friday’s Inc., Red Lobster, Buca di Beppo, Rubio’s Coastal Grill, BurgerFi and Anthony’s Coal Fired Pizza, Bloomberg reported.
PF Chang’s refinancing effort “speaks to the general uncertainty about eating out at casual and quick-casual dining,” said Jody Lurie, a credit analyst with Bloomberg Intelligence. “We’ve seen lumpiness in the sector and selectivity by consumers, and expectations for 2025 are similar.”
In 2019, PF Chang’s issued a $430 million senior loan to support the buyout of the company by Paulson & Co. and Tri-Artisan Capital. Last year, Paulson injected an additional $20 million into the company to support its growth.
S&P said that extending its obligations would improve the company’s liquidity position and address short-term refinancing risk.