Advantica registers $185 mln new notes for exchange to reduce debt

By Peter Heap

New York, Nov. 1 - Advantica Restaurant Group, Inc. filed a registration statement for $185 million of new notes to be offered in an exchange intended to reduce its outstanding debt.

The Spartanburg, S.C. company said the new senior notes will mature Sept. 30, 2007 and will be obligations of both Advantica and Denny's Holdings, Inc. making them structurally senior to the outstanding debt.

They will be offered in an exchange for up to $264.6 million of Advantica's $529.6 million outstanding 11¼% senior notes due Jan. 15, 2008.

Details of the exchange were left blank in the filing with the Securities and Exchange Commission, including the amount of new notes that will be offered for the old and the coupon on the new notes. Accrued interest will be paid in cash.

However it did note that the market value of the 11¼% notes as of Oct. 29 was $161.5 million, based on a mid-price of 60.9375 multiplied by the $265 million outstanding.

Advantica indicated it would set a minimum amount of notes it will accept although it did not specify that number in the filing.

If the exchange is completed, Advantica said it will reduce its outstanding debt.

"Accordingly, completion of the exchange offer may help to improve Advantica's access to financing sources and its ability to refinance its revolving credit facility, which matures in January 2003," the company explained in the SEC filing.

UBS Warburg is dealer manager for the exchange offer.

The new notes will be callable at a premium beginning Sept. 30, 2004, declining to par on Sept. 30, 2006. They will also have an equity clawback for up to 35% until Sept. 30, 2004. The outstanding notes are callable beginning Jan. 15, 2003 at 105.625, declining to par in 2006.

Advantica said that it may look to repurchase notes not tendered through open-market purchases, private transactions, other exchanges or tender offers or redemptions.

In a separate filing with the Securities and Exchange Commission, Advantica also disclosed that it amended its credit agreement effective Oct. 18. The change increased the maximum ratio of total debt to EBITDA (earnings before interest, taxation, depreciation and amortization) for the remainder of the facility. Advantica was in compliance with this covenant at Sept. 26 but it was due to become more restrictive for the quarter ending Dec. 26, 2001.

In addition, covenants and other provisions were modified to permit the exchange to go ahead.

End

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