Avado requests approval for $40 million exit financing facility

By Caroline Salls

Pittsburgh, April 18 - Avado Brands Inc. asked for approval of a commitment letter with DDJ Capital Management, LLC for $40 million of exit financing, according to a Friday filing with the U.S. Bankruptcy Court for the Northern District of Texas.

The new tranche A senior secured credit facility will include a $30 million revolving credit facility and a $10 million term loan.

The facility will be secured by a first-priority lien on substantially all of the assets of the reorganized company.

Interest will be at Libor plus 525 basis points.

The loan is on better terms than the company had originally expected. It had previously been talking to another lender and obtained a commitment letter last week on terms that were "workable."

However, after that commitment letter was shown to DDJ, which will ultimately become the largest shareholder of the reorganized company, DDJ agreed to submit a better offer.

"The new tranche A financing facility will provide financing that is crucial to the emergence of the debtors from Chapter 11," the filing said. "Absent such financing, the debtors would be unable to emerge from bankruptcy."

According to the filing, the plan calls for exit financing from three sources, including a tranche A revolving credit facility, a tranche B term facility and the issuance of new convertible preferred stock.

In the disclosure statement filed March 2, the company has received commitments from DDJ Capital Management for the tranche B term loan and the convertible preferreds.

The motion also asks for approval of the fees and expenses related to the facility, including a $100,000 retainer and $250,000 commitment fee.

The facility will become effective on the effective date of the company's plan of reorganization.

A hearing is scheduled for April 21.

Avado, a Madison, Ga., restaurant company, filed for bankruptcy on Feb. 4, 2004. Its Chapter 11 case number is 04-31555.

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