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Luby's refinances bank debt
New York, June 7 - Luby's Inc. said it entered into agreements to refinance its bank debt, amend its subordinated convertible debt and cure the defaults on the convertible debt and renew the employment contracts of Chris Pappas, president and chief executive officer, and Harris Pappas, chief operating officer.
The new bank debt consists of a $50 million secured revolving line of credit and a $27.9 million secured term loan.
JPMorgan Chase Bank is administrative agent of the revolver and Wells Fargo Bank NA and Southwest Bank of Texas NA are documentation agents. At closing, $36.3 million was drawn.
The term loan was arranged by Guggenheim Corporate Funding LLC. It will be paid down as the company continues to sell closed restaurant properties currently held for sale. Interest rates will reduce as the balance is paid down.
Both tranches of bank debt are for three years.
In addition to borrowings on the new facilities, the San Antonio, Texas restaurant company used proceeds from real estate sales and short-term investments to repay its old bank debt.
The new employment agreements with Chris and Harris Pappas amend the terms of the March 2001 purchase agreement and cure the default associated with the company's convertible subordinated debt. Under the new terms of the subordinated convertible debt, the notes will remain unsecured and subordinate to the company's senior debt. The seven-year notes bear a prime-based interest rate. They remain convertible at a price of $5.00 per share until June 7, 2005 when the price declines to $3.10. As long as the subordinated debt is held by Chris and Harris Pappas or both of them are executive officers of the company, they are entitled to nominate three individuals to serve as directors.
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