O’Charley’s Inc. has completed a sale-leaseback of 50 O’Charley’s restaurant properties, which produced gross proceeds of approximately $105 million. The Company is using the net proceeds from the sale-leaseback of approximately $103.8 million and approximately $11.4 million of available cash to redeem at par all of its $115.2 million principal amount of 9% senior subordinated notes due November 2013 (the “Senior Notes”), leaving the Company with virtually no long-term debt on its balance sheet. The properties were purchased by STORE Capital, an institutionally funded, single-tenant real estate investment trust based in Scottsdale, AZ, founded by a veteran management team including Mort Fleischer and Chris Volk.
The impact of the two transactions will be a decrease in annual interest expense associated with the Senior Notes of approximately $10.0 million which will be offset by approximately $8.8 million of incremental annual rent expense. The full impact of these changes will be reflected in the Company’s 2012 results.
O’Charley’s Inc. President and CEO, David W. Head, commented, “As a result of this 20-year sale-leaseback, we believe we have significantly strengthened our financial position. In addition, by monetizing approximately half of our real estate portfolio and locking in more favorable long term financing, the transaction increases our flexibility in a difficult operating environment.”
The Company also announced that it has entered into an Amended and Restated Credit Agreement with its existing banks, under which it has reduced its revolving credit facility to $30 million from $45 million and extended the facility’s term to 2016. While the facility’s terms are substantially consistent with the relevant terms of the prior facility, which was to mature in August 2013, the Company is permitted capital expenditures for restaurant remodels and expansion under the new facility of up to $5 million for 2011 and up to 35% of EBITDA (as defined) for 2012 and the years thereafter.