AmeriKing unable to make payments on notes after violating bank covenants

New York, Nov. 21 - AmeriKing, Inc. said it has received a blockage notice from its senior lenders and therefore neither it nor its National Restaurant Enterprises Holdings, Inc. unit have the funds to make interest payments on their senior notes. It added that it expects to begin discussions on a financial restructuring.

Affected by the blockage notice are the 10¾% senior notes due 2007 of National Restaurant Enterprises Holdings, with $53.5 million outstanding, and the 10¾% senior notes due 2006 of AmeriKing, with $500,000 outstanding. A coupon payment was due on Nov. 15 for the National Restaurant notes and will be due Dec. 1 on the AmeriKing notes, according to a filing with the Securities and Exchange Commission disclosing the non-payment.

AmeriKing also said in the SEC filing that it expects over the next few months to discuss a financial restructuring with its lenders, creditors and major stakeholders, including Burger King Corp.

AmeriKing said the blockage notice was delivered because AmeriKing and its operating subsidiary National Restaurant Enterprises, Inc. were not in compliance with the EBITDA (earnings before interest, taxation, depreciation and amortization) covenants in their credit facility for the period ended Oct. 22, 2001.

AmeriKing said the notice - received despite AmeriKing's "cash financial resources" -precludes National Restaurant Enterprises from making any interest, dividend or other payments to its parent company National Restaurant Enterprises Holdings, Inc. or AmeriKing. That means AmeriKing and National Restaurant Enterprises Holdings "have no funds available to make the interest payments due on their respective senior notes," AmeriKing said in the SEC filing.

Under the credit facility terms, the companies have no opportunity to cure the non-compliance.

AmeriKing said it will accrue interest on both series of senior notes at the penalty rate of 12¾% until cash payments can be made again.

The company will continue to make payment-in-kind interest payments, including the payment due on Nov. 15, 2001 on its senior PIK notes due 2008.

AmeriKing will also accrue dividends on its senior exchangeable preferred stock at 13% until cash payments can be made since it cannot make the dividend payment scheduled for Dec. 1. If cash payments are not made for four consecutive fiscal quarters, holders of the preferred stock will be entitled to elect two directors to AmeriKing's board.

AmeriKing said its decision to accrue interest was taken in part to avoid bankruptcy proceedings which could result in Burger King terminating its franchise agreements. For the same reason, the company needs to promptly pay Burger King and its vendors and suppliers.

Although results for the second half of 2001 were "disappointing," due to general economic conditions, AmeriKing said it and National Restaurant Enterprises continue to generate sufficient positive cash flow to remain current on its credit agreement.

Several restaurants have been closed and the company is renegotiating "numerous" leases to reduce its rent costs.

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