SAN DIEGO — Financing required for Paragon Restaurant Group's $25.4-million cash acquisition of the Irvine-based Rusty Pelican restaurant chain has been delayed because of uncertainties from the stock market's crash, the companies said Wednesday.
Paragon was "very close to closing" negotiations on a financing package, but the agreement fell apart after the Dow Jones Industrial Average fell 508 points Oct. 19, Paragon Vice President William Seckinger said Thursday. The financing package must now be restructured because some companies that were initially involved backed out after the crash, according to Seckinger.
"It still looks like a good deal, but it's just a question of lining up the required financing," said Seckinger, who added that the proposed sale to Paragon is "in the best interests of our shareholders."
However, Rusty Pelican Chairman and Chief Executive Louis A. Siracusa on Wednesday cautioned that "with the existing turmoil in the markets, it is by no means certain that the transaction will be successfully completed."
Paragon, formerly a subsidiary of Denver-based Vicorp Restaurants, earlier this year changed its name to Paragon. Based in San Diego, it operates specialty dinner houses in 11 states under the chain names of Hungry Hunter, Mountain Jack's, Boathouse, Monterey Whaling Co., The Dock and Carlos Murphy's.
"There's no question that it's more difficult to put together a deal today than it was two weeks ago," one San Diego food industry executive said Thursday. "And, the restaurant business has been out of favor on Wall Street for six months or longer."
The market's tumble "created uncertainty over where interest rates are heading," the executive said.
"That makes it a very difficult time to do a deal. I'd guess, though, that things would kind of settle out during the next 30 to 60 days."
Publicly traded Rusty Pelican on Wednesday agreed to extend a previous deadline for completion of the deal to Nov. 20 from Oct. 31. The Irvine-based company also agreed to extend the deadline until Dec. 15 in return for an unspecified cash payment.
Rusty Pelican operates 21 restaurants in seven states, including 12 in California. Rusty Pelican shareholders approved the $25.4-million cash buyout during a special meeting on June 25.
Paragon has postponed a management and restaurant chain restructuring that was announced in September. "We're treading water until this is sorted out," Seckinger said.