Krispy Kreme Doughnuts, Inc., whose accounting scandal has spawned a number of Federal probes and shareholder lawsuits, has received $225 million in financing.
The funding includes a $75 million, first-lien, senior-secured revolving credit facility; a $120 million second-lien. senior-secured term loan; and a $30 million second lien prefunded revolving credit and letter of credit facility. Credit Suisse First Boston and Silver Point Finance, LLC arranged the financing.
Management at the embattled doughnut maker said it will use the proceeds of the term loan to repay about $90 million in an outstanding credit facility, as well as shore up the company’s balance sheet. The Winston-Salem, N.C.-based Krispy Kreme will use the rest of the financing for general corporate purposes.
“This is an important, positive step for Krispy Kreme,” said Steve Panagos, president and chief operating officer of Krispy Kreme and managing director of Kroll Zolfo Cooper, LLC, the turnaround specialist that took control of the specialty retailer back in January. “With more liquidity and no near-term repayment deadlines, we look forward to getting back to the business of selling doughnuts and coffee.”
For the moment, executives at Krispy Kreme will likely spend a fair amount of time with attorneys and investigators. The company has already revealed that the U.S. Attorney’s Office for the Southern District of New York is investigating the company’s bookkeeping. The Securities and Exchange Commission has commenced a formal investigation of Krispy Kreme as well.
Last month, Krispy Kreme announced that a class of individuals who took part in the company’s retirement savings plan and profit-sharing stock ownership plan are suing the company and former officers. The plaintiffs allege the company and former officers didn’t manage the plans “prudently and loyally” by continuing to offer the company’s stock as an investment option and to hold large percentages of the plans’ assets in the company’s common stock.
The plaintiffs also allege that the company and officers failed to provide complete and accurate information about the risks of the company’s stock, failed to monitor the performance of fiduciary appointees, and breached duties and responsibilities as co-fiduciaries.
In January, Krispy Kreme announced that it would be restating revenues for fiscal year 2004. That restatement is expected to lower the company’s pre-tax income for the year by between $6.2 million to $8.1 million. On March 25, Krispy Kreme’s lenders agreed to extend the default date on the company’s debt until April 11. The extension was granted to give the food retailer time to file its financial statements for the quarter ended October 31, 2004. Absent the waiver, the company might be in default on a $150 million credit facility.