IRVINE — Restaurant Enterprises Group Inc. said Wednesday that its cash crunch is so severe it will suspend paying interest on $275 million in junk bonds until sales go up and it can pare its costs of doing business.
The company amassed that debt in 1986, when it bought the Coco's and Carrows chains of coffee shops, the Charley Brown's family restaurant chain and the El Torito Mexican restaurant chain. But like other 1980s leveraged buyouts--in which the buyers of a company pledge to repay borrowed money from the company's future earnings--REG is not generating enough sales to pay off its debt.
The company told the federal Securities and Exchange Commission on Wednesday that before year's end it will present a plan to restructure its finances without filing for bankruptcy protection. It is standard procedure for companies to report to the SEC any major changes in their financial positions.
During the next four to six months, the company said, it plans to strengthen its balance sheet by cutting costs and selling some restaurants, then leasing them back. The company also expects sales to turn up, which it says usually happens between January and June.