Restaurant bankruptcies are expected to rise in 2009, but some debt-riddled operators are getting more leeway with lenders on hope a government stimulus package could provide relief by mid-year.
Many companies that loaded up with debt during the credit and housing booms are struggling to keep up with loan payments as pinched consumers cut back on restaurant meals during the worst economic downturn since the Great Depression.
As if that were not enough, restaurant chains — particularly those in the middle of the market — also are grappling with unprecedented over-saturation. To correct it, thousands of individual eateries are expected to close, as well as some well-known chains.
“Unfortunately, I am expecting bankruptcies to tick up in the restaurant space,” said Nick Jachim, managing director at KPMG Corporate Finance LLC, who advises distressed companies.
The owners of eateries such as Bennigan’s, Village Inn, Old Country Buffet, Bonanza and Black Angus have already filed for U.S. bankruptcy protection and other names, both public and private, are flashing warning signs.
Across the industry, companies have breached covenants, amended covenants or signaled trouble ahead. They include upscale steakhouse operator Ruth’s Hospitality Group Inc, Ruby Tuesday Inc, O’Charley’s Inc, and Cheesecake Factory Inc.
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