Real Mex Restaurants provides terms of debt agreement changes, waivers

By Caroline Salls

Pittsburgh, Aug. 2 - Real Mex Restaurants, Inc. announced the details of its agreement with its various lenders and noteholders to amend covenants and waive defaults under its principal debt agreements. The details were included in an 8-K filed with the Securities and Exchange Commission on Tuesday.

As previously reported, the lenders and noteholders agreed to the waivers and amendments as Real Mex works to reorganize its capital structure.

In addition to the waiver agreement, the company made a $9.2 million interest payment due on its notes in July within the grace period. An affiliate of indirect majority shareholder Sun Capital Partners provided Real Mex with an infusion of additional liquidity on July 28 as part of the ongoing restructuring process.

GECC loan amendment

Changes to the company's principal debt agreements included a limited waiver and amendment to a revolving credit agreement with General Electric Capital Corp.

The GECC loan was amended to waive breaches of the leverage ratio, adjusted leverage ratio, interest coverage ratio and consolidation cash flow covenants for the period ended June 26, to provide that no default will be deemed to have occurred before Nov. 15 solely because of any breach or violation of the financial covenants in the credit agreement for the period ending Sept. 25 and to waive breaches and cross-defaults under the company's other significant debt agreements.

In connection with the GECC amendment, Real Mex parent RM Restaurant Holding Corp.'s majority stockholder, Sun Cantinas Finance, LLC, agreed to purchase a $5 million participation interest in the $15 million revolving credit facility.

Sun also will have the option to purchase up to an additional $2.5 million participation interest in the revolver until the earlier of the filing of an insolvency proceeding by the company and Nov. 30.

To the extent Sun exercises its option to purchase the additional participation interest, the maximum amount the company may borrow under the revolving credit facility will increase and the maximum amount the company may borrow under the letter-of-credit facility will decrease, each by an amount equal to the amount of the additional participation interest purchased by Sun.

14% notes amended

Real Mex also entered into a second supplemental indenture to make changes to its 14% senior secured notes due 2013.

The supplemental indenture waives and amends the document in connection with a breach of the consolidated cash flow covenant for the period ended June 26 and amends the indenture so the consent of holders of at least 35% in principal amount of the outstanding notes will be required to accelerate the notes through Oct. 31.

The company said holders of $89.78 million of the outstanding $130 million principal amount of the notes, or roughly 65%, consented to the supplemental indenture on July 27.

Opco/Holdco changes

The company entered into a limited waiver and first amendment to its Opco term facility under which breaches and cross defaults on the company's other significant debt agreements were waived.

An amendment to Real Mex's Holdco credit agreement also waived breaches and cross defaults on the other debt agreements as well as breaches of the leverage ratio, adjusted leverage ratio, interest coverage ratio and consolidated cash flow covenants for the period ended June 26.

Restructuring plan deadlines

The GECC credit agreement, note indenture and Opco and Holdco term facilities have also been amended to add events of default if the company fails to submit a detailed proposal to restructure the company's material debt by Sept. 15 and to negotiate and execute a binding restructuring term sheet, plan support agreement, lock-up agreement or similar agreement based on the restructuring plan by Oct. 31.

Management changes

James Shein was appointed as a director of the company, effective July 28, to fill the vacancy caused by the resignation of Craig S. Miller, according to the 8-K.

Additionally, Mike Keeland will be appointed as president of Real Mex Foods, Inc., the company's purchasing, distribution and manufacturing subsidiary, effective Aug. 29.

The company said Keeland most recently was chief executive officer of Annie Chun's, Inc.

Real Mex is a restaurant company based in Cypress, Calif.

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