Steak n Shake’s lenders say restaurant chain still owes millions

The Steak n Shake location at 1501 E. 86th St. (IBJ photo/Eric Learned)

Steak n Shake’s lenders have filed a federal lawsuit against the company, saying the Indianapolis-based burger chain still owes more than $8.5 million in fees and interest on a $220 million loan the company had said it paid off in February.

The chain, which owns or franchises more than 500 restaurants, declared in a March 9 press release that it now is “debt-free, making Steak n Shake one of the strongest companies in the restaurant industry.”

But 15 days later, in a lawsuit filed in federal court in New York City, Wilmington Trust, which represents the lenders, took issue with that characterization.

“Contrary to Steak n Shake’s position, Steak n Shake is not ‘debt-free’ and the credit facility has not been ‘retired’ because there are millions of dollars in ‘obligations’ that Steak n Shake still owes,” according to the 20-page lawsuit.

Wilmington argues that Steak n Shake n Shake had violated various terms of the credit agreement starting as far back as December 2018. Doing so, according to the suit, triggered language in the agreement causing the interest rate to increase and requiring Steak n Shake to pay Wilmington’s costs and expenses.

The suit says Steak n Shake owes $4.8 million in additional interest, as well as $3.7 million to cover Wilmington’s costs and expenses.

San Antonio-based Biglari Holdings, Steak n Shake’s parent, has not filed a response to the suit. A message left by IBJ at Biglari Holdings headquarters was not returned.

The early weeks of 2021 were drenched with drama for Steak n Shake, as observers speculated the company, which has suffered years of struggles and lost a combined $29 million in 2018 and 2019, would land in bankruptcy.

The company borrowed the $220 million in 2014, when it was riding high. It said it whittled the balance to $153 million as of Sept. 30 of last year, in part by buying back debt at a discount from lenders jittery that they would not be paid in full.

Steak n Shake had said that its parent company, Biglari Holdings, had no plans to back the debt—a position that gave the restaurant company leverage to strike those discounted-debt deals. But in the end, Biglari Holdings did step in with cash to rescue Steak n Shake, just weeks before the March 19 deadline to pay off the loan balance.

After making the payment, Steak n Shake sued Fortress Investment Group, which had bought up most of Steak n Shake’s debt and tried to use that position to take control of Steak n Shake.

The suit alleged that Fortress obtained confidential financial information about Steak n Shake in mid-2020 during negotiations on potential real estate deals and then misused that knowledge when it became the largest lender.

“This scheme has cost Steak ‘n Shake millions of dollars and countless hours of management attention at a critical time,” the complaint said. “Fortress must be held to account for its breach, and for its bad faith conduct.”

However, Steak n Shake dismissed the suit April 2. The filing does not say why.

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10 thoughts on “Steak n Shake’s lenders say restaurant chain still owes millions

    1. And why would that be, Rhea? Either the contract allows for these additional payments or not. Let the court sort it out or the parties negotiate. Not sure why you’re weighing in on a legal matter when you have no idea what the agreement says or whether SnS lived up to it.

    2. Because they were almost faced with getting pennies on the dollars about 2 months ago, again they should be breathing a big sigh of relief for what they got.

    3. Still makes no sense – SnS ran the company so poorly the bonds were trading at a 50% discount and they snapped them up – those forcing the bond holders to lose 50%. If the lenders are legally owed more, who are you to say they should relinquish that right just because YOU think they should be happy they got something.

  1. So sad S&S can’t get their act together and reposition the company based upon their strengths. They could easily improve upon the In and Out model which is extremely successful despite offering clealry inferior fries and Shakes. Their burgers are better but only because of their incredible quality control. S&S patties are just as good but you never get the same complete end product twice. Sometimes it’s great and sometimes it’s terrible. The bread and toppings also would need some slight improvement in quality. Fix that problem as well as offer comparable drive thru service (I and O and Chick Fil A have perfected it ) and slim the product offering down to just a comparable size as those chains and Steak and Shake could be a big winner. Every time I go to I and O or CFA they have 20 cars in their drive thru who all get serviced in 10 minutes or so. Sadly they are saddled by their large dine-in formats, an enormous menu, slow service and poor quality control but their burgers, shakes, and fries could potentially be the best in the business

    1. In and Out also doesn’t franchise and wants to keep their stores close to their food sources. I imagine both of those factors make it easier to control quality.

    2. Greg, the problems are a little deeper than stale toppings. I love SNS, but don’t think it can be saved, simply because Biglari is a pig of a leader. He has 1 play in the playbook— cut costs. He played that card 10 years ago, got a ROI and now has nothing else. The CFA drive through serves 20 cars in 10 minutes because they have 40 great employees working. SNS is lucky to have 4. CFA wants to deliver a great product and grow the business. Biglari wants to siphon off every Penny to fuel his private jet.

      Still waiting for IBJ to do a story on his puppet board members.

  2. Mr. Andrews, Is your first quote referring to “Steal n Shake” a direct quote, a pun, a typographical error or a freudian slip. Inquiring minds want to know.

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