Report: Steak n Shake hires adviser to help it navigate debt morass

Steak n Shake owes $153 million on a loan it took out in 2014 that matures in March. (IBJ file photo)

Indianapolis-based Steak n Shake has hired a financial adviser to plot a possible debt restructuring in advance of a $153 million loan coming due in March, The Wall Street Journal reported Wednesday.

The publication said Washington, D.C.-based FTI Consulting will work with Steak n Shake as it explores a possible out-of-court restructuring of its debt and lease obligations or a bankruptcy filing.

A representative of Biglari Holdings, Steak n Shake’s parent company, did not respond to a request for comment. An FTI representative declined to comment.

IBJ reported Jan. 15 that if the company defaults on the $153 million term loan, which it lacks the cash to pay, lenders could force the company into bankruptcy, where it could be sold, reorganized or even liquidated.

The amount the company owes is daunting given its shrinking scale. Steak n Shake had 489 restaurants in operation as of Sept. 30, down 20% from the number in operation when it took out the loan in 2014, and foot traffic at those remaining restaurants has plummeted.

Based on publicly available data on debt trades, the $153 million outstanding as of the end of the third quarter was trading at a 48% discount, leaving it with a fair market value of just $80 million, according to a Securities and Exchange Commission filing.

“It tells me there are serious concerns over collection,” Hannah Joseph, an Indianapolis attorney who represents many restaurant clients but not Steak n Shake, said earlier this month. “I don’t think it can mean anything else.”

The loan originally was for $220 million, but Steak n Shake whittled down the balance over the years, in part by buying back debt at a discount.

Steak n Shake stipulated when it took out that loan that it was backed only by that business and not by Biglari Holdings’ other assets. Those include insurance companies, an operator of oil fields and a big stake in Cracker Barrel Old Country Store.

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10 thoughts on “Report: Steak n Shake hires adviser to help it navigate debt morass

  1. The Biglari takeover has done no favors for the brand and been a financial debacle for franchisees. Only winner has been Biglari, who have bled it dry.

    1. And the crazy part is, you cannot get a “meal deal” for $4 at any other burger chain. My last trip to Hardees with a friend cost $17. A Quarter Pounder or Whopper or Big Roast Beef meal from other fast food places will cost you $7-8 (without table service)…people will pay good money for good food, and extra for table service.

  2. I hate to see steak n shake go but poor management and lack of new ideas on how to serve customers more efficiently will certainly lead to their demise. Covid has been a big part of this as the chain hasn’t allowed in house dining for quite some time and is attempting to operate through a drive through only model. One would think if they were going to do that they would make an effort to revamp their drive through and figure out how to serve more customers and in a quicker fashion. Someone from steak n shake needs to go sit outside a Chick fil A for a day or two and watch them serve a billion chicken sandwiches an hour out their drive through. It’s not that hard, they have good food, reasonable pricing you just can’t suck!

  3. It shouldn’t take a rocket scientist to figure out how to turn things around. Focus on the sit-down model, retrain staff, ensure the quality of food, and run a public marketing campaign.

  4. Ryan, Grant – all good ideas, but that would require Biglari to not think he’s the smartest person in the room. The issue is the CEO and until he turns the chain over to someone else, they’re sunk.

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