Krispy Kreme Doughnuts Inc. said it asked its lenders to approve amendments to the company’s secured credit facilities which, among other things, would relax some of the company’s financial covenants. The agreements currently are scheduled to become more stringent during fiscal 2009.
The embattled, once chic, doughnut maker said that based on unaudited results, it was in compliance with the financial covenants in its credit facilities as of February 3, 2008, which is the end of the company’s 2008 fiscal year. “While the company believes it will be able to obtain the requested amendments, there can be no assurance that the lenders will agree to them,” said officials in a statement.
Krispy Kreme did not elaborate on the details of the amendments it is seeking. However, it did say that in connection with any amendment, the cost of credit extended to the company under the facilities will increase.
As of February 3, the outstanding balance of the term loan under the facilities was $76.1 million and outstanding letters of credit under the facilities were $20.3 million. The term loan balance reflects a prepayment of $10.9 million made on February 1, related to the completion of the previously announced sale of the company’s mix manufacturing and distribution facility in Effingham, Illinois.
Krispy Kreme, which operates retail stores in the U.S. and Canada, is still trying to recover from an earlier accounting scandal and the subsequent shrinking of the company. At the beginning of this year, Daryl G. Brewster resigned as president and chief executive officer citing personal reasons. He was replaced by current chairman James Morgan.
Krispy Kreme’s stock had plunged nearly 70 percent in the past year, but surged more than 8 percent on Tuesday. However, the announcement about the amendment request came after the markets closed on Tuesday, and on Wednesday morning, the stock was down 3 percent trading at $3.19 per share.