Steak n Shake reportedly retires $153M in debt, averting possible bankruptcy

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Steak n Shake is aggressively pursuing a strategy to convert table-service locations to counter-service and drive-through only, like this store at 5360 N. Keystone Ave. (IBJ photo/Eric Learned)

Indianapolis-based Steak n Shake has averted a potential bankruptcy filing by purchasing and retiring the remaining balance of a $220 million loan due next month, Bloomberg reported on Monday morning.

The company completed its repurchase from lenders on Feb. 19, according to Bloomberg’s sources, who asked not to be named discussing private transactions.

Steak n Shake and advisers including FTI Consulting Inc. and the law firm Latham & Watkins were preparing for a potential Chapter 11 filing earlier this month while the company negotiated with holders of the debt, Bloomberg previously reported. Those investors included Fortress Investment Group. Steak n Shake and its advisers declined to comment.

IBJ reported Jan. 15 that the struggling restaurant chain lacked the cash to pay off a $153 million loan that comes due March 19.

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.

Still, the amount the company owed was 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 customer traffic at those remaining restaurants has plummeted during the pandemic.

Back then, Steak n Shake was riding high, with its deep discounting strategy fueling $154 million in operating profits over the prior four years.

But the magic soon vanished, as a host of stumbles—including service problems caused by high employee turnover—led to plunging customer counts. In response, hedge fund investor Sardar Biglari, who gained control of the chain in 2008, began shuttering money-losing restaurants and slashing costs.

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.

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13 thoughts on “Steak n Shake reportedly retires $153M in debt, averting possible bankruptcy

    1. Good one, John M. (Have you seen Gary Varvel’s cartoon with Air Force One flying across the country “raining” pink slips?)

    2. It does sound like they did nothing about a slightly higher wage which lead to higher turn over, fine line sometimes.

    3. In defense of the Democrats, everyone in the world knows how to run a restaurant better than Sardar Biglari. If you disagree, try eating at a Steak and Shake first.

    4. @John M Unlike the Republicans, you mean, who have managed to screw up the economies handed to them. Bush, much? Reagan deficit? It’s okay to run up the debt when it’s for the wealthy – but gawd, not for the poor. Because $15/hour is the high life, isn’t it?.

  1. They need to get back to basics: Steakburgers, properly cooked chili and chili/mac, Frisco & Patty melts, hot fries and real ice cream shakes; limited hours (L, D) better managers, good service. Dump the breakfast and all the other sandwich choices (hot dogs, god -knows-what burgers, etc.)

    1. I ate breakfast at my nearby S&S frequently before they wrecked the menu. It stood up to the other, rather upscale breakfast options in my area at about half the price. It was a breakfast destination for many people. It was good while it lasted. S&S of old is gone. I miss it.

  2. Maybe $15 will help S&S and others. It means employees may possibly be able to live on their wages, and maybe that makes working a better proposition. Maybe it means they’ll stop trying to cut their costs by hiring the least competent and cheapest, which drives poor customer service, which drives away customers. Maybe employees will actually become a company’s most valuable asset, as so many CEOs are wont to proclaim as they cut benefits, increase work hours, and hold the line on pay. Maybe it will cause employers to invest in their employees…to feed the golden goose as opposed to taking the hatchet to its neck. And, before you all get too excited, yeah, I’m the CEO of a small company . S&S was a great place to eat until the hedge fund guy bought it and tried to operate a business in which he had no apparent experience or wisdom. He bought it for the cash flow and real estate, and gave himself a contract that benefits him, not the company. and killed a Midwest institution.

    1. He (Sardar Biglari, the “hedge fund guy”) just hasn’t had a chance to ruin Cracker Barrel yet. He only owns 19.9% of Cracker Barrel, and has three times has requested and been denied a seat on its board of directors by shareholder votes. Michael and Tim are right–Steak n Shake is nothing like it used to be.

    1. That’s his idea, with budget food. The problem is he has decades of brand equity and a customer base with expectations of what dining at Steak ‘n Shake is like, with no clue how to pivot. The pandemic has offered him an excuse to board up all of his indoor dining spaces.

      There are limits to what he can do with the brand. Would it make sense for White Castle to start serving filet mignon? When people go to steak ‘n Shake, they expect table service done well.