Steak'n Shake Recapitalization?

[Parsad]

A boardmember sent me a snippet stating that Biglari Holdings is recapitalizing Steak'n Shake by $160M through Jeffries?  Anyone find anything on that?  I'm looking and I don't see anything. 

 

From the snippet, it says he's looking at a $20M revolver and $140M 4-year term at 10% annual amortization.  If true, he's levering the chain and I believe pulliing the money out to the holding company.  Cheers!

[nhall110]

confirmed.  dividend recap in the market

[Parsad]

Not a good idea.  Not the amount he's taking out and the rate at which he's borrowing.  You start to make mistakes when you get impatient!  Cheers!

[nhall110]

why do you say that?  Leverage, though high, isn't too crazy.  There's plenty of FCF, owned RE assets, plus support from the parent

[Parsad]

why do you say that?  Leverage, though high, isn't too crazy.  There's plenty of FCF, owned RE assets, plus support from the parent

 

He's paying 10% annually on it, correct?  He's going to have to get a pretty good return on the capital he's taking out. 

 

You spend all this time deleveraging because you want a rock-solid balance sheet, and then you lever it up again because you are impatient at deploying capital and need to get your hands on as much as you can.  Cheers!

[nhall110]

no...it'll be 5-6% cash interest, then pay off 10% of it a year through amos.

[Parsad]

That's not too bad then.  Still, what's the harm in just gathering the cash flows over time and putting it to work?  Cheers!

[bookie71]

Remember that levers work in both directions!

[shalab]

It can help increase book value faster.

[Kuhndan]

nhall 110, when you say its in the market, do you mean you've confirmed that Jeffers is shopping the deal?

[nhall110]

yes

[rogermunibond]

It can help increase book value faster.

 

As well as executive compensation.  Munger says always look at incentives.