Granite City Food & Brewery targets USD 20m junior capital raise to alleviate lender standoff

10 July 2017
Granite City Food & Brewery is looking to raise up to USD 20m in junior capital, according to three sources close to the situation. Management is exploring several structures, ranging from second lien debt down to convertible securities, the sources added.
 
The Minneapolis-based restaurant owner previously engaged Lincoln International to advise on financial and strategic alternatives while Granite City operates under a recent forbearance agreement. The ongoing capital raising is geared in part toward coming up with enough funding to make contingent loan payments, according to the sources.
 
On 31 January, the publicly-traded restaurant company failed to make a USD 5m principal payment on a USD 40m credit facility due 2019. The entire credit facility was immediately classified as current, and the company entered into a forbearance agreement with secured lender Citizens Bank that extends until 2 October. The forbearance is conditioned on Granite City raising USD 7m in new capital, meeting certain financial maintenance covenants and delivering a short-term budget to Citizens Bank.
 
The company’s liquidity stood at USD 4.8m as of 28 March, according to SEC filings.
 
Granite City owns 35 Granite City restaurants in 14 states and five Cadillac Ranch restaurants in five states. Its revenues have overall have been flat, but marginally challenged. Restaurant revenue was flat in fiscal 2016, ended 27 December 2016, at USD 150.3m, as opposed to USD 150.64m in fiscal 2015, while it swung to a USD 890,000 loss in fiscal 2016 as opposed to an operating profit of USD 4.045m year-over-year.
 
The company owns a beer production facility in Ellsworth, Iowa, but leases all 35 of its Granite City restaurants and five Cadillac Ranch restaurants and its corporate offices. Granite City’s majority shareholder is Concept Development Partners LLC, a partnership between Dallas-based private equity firm CIC Capital Partners and restaurant executive Robert Doran. CDP made an equity-and-debt investment in Granite City in 2010. 
 
Doran was the CEO of the company, but he ended his tenure on 15 May, when industry executive Richard Lynch, formerly chief brand officer for Popeye’s Louisiana Kitchen took over.
 
Granite City did not return calls seeking comment.