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Buffets granted final approval of $25 million letter-of-credit agreement
By Jennifer Lanning Drey
Portland, Ore., March 12 - Buffets Holdings, Inc. obtained final court approval to enter into a $25 million post-bankruptcy letter-of-credit facility agreement with U.S. Bank NA, according to a source familiar with the matter.
As previously reported, under the agreement, Buffets will maintain with U.S. Bank an amount equal to 105% of the total stated amount of each letter of credit.
Additionally, Buffets will pay interest on the amounts paid by the bank under letters of credit at a fluctuating rate of 6% above the Prime rate.
In its motion requesting the approval, Buffets said some of the letters of credit in its pre-bankruptcy credit facility expire soon.
The company said it was concerned that unless arrangements were made immediately to replace or renew the letters of credit, the beneficiaries would draw on them, creating additional secured debt to the debtors, which would accrue interest at a significantly higher rate than the amount of the fees being paid on the letters of credit.
The company also said it would need to issue additional letters of credit in connection with the renewal of workers' compensation and other insurance coverage and vendor obligations.
Buffets said it can only request the issuance or renewal of letters of credit if they are being issued to replace or renew a previous agreement, and the amount cannot exceed the previous amount.
Buffets Holdings, a steak-buffet restaurant company based in Eagan, Minn., operates restaurants under the names Old Country Buffet, HomeTown Buffet, Ryan's and Fire Mountain. The company filed for bankruptcy on Jan. 22, and its Chapter 11 case number is 08-10141.
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