Struggling Kona Grill Sold for $20.3 Million
Struggling Kona Grill has a new owner, although it’s far from a stranger. The Scottsdale, Arizona-based brand was dealt to Williston Holding Co. Inc., the company founded by Marcus Jundt. He is one of the polished chain’s founders and served on the board from 2000–2009. Jundt also held the CEO post twice—from 2006–2009 and then for a few months last year. He resigned in March.
Jundt’s Williston company, which operates out of Houston, paid $20.3 million in cash for the brand. WHC will also take on more than $5 million in liabilities.
In April, Kona Grill filed for chapter 11 bankruptcy protection in United States Bankruptcy Court for the Delaware District. The company said it had assets of $53.6 million and debts of $74 million, and just $1.2 million in cash on hand. Also per the filing, Kona Grill closed 15 more restaurants and was down to 27 units. There were 34 locations in 20 states when the company filed its annual report in April.
Kona was scheduled for an auction July 23. However, only one entity—WHC—submitted a “stalking-horse” bid in May. The company isn’t quite buying the entire brand. The deal is for 24 of the 27 locations. It’s not clear yet which stores are involved.
Per court proceedings July 25 in Delaware, WHC will keep Kona Grill running and plans to work with the same vendors and partners. The brand’s attorney said 2,300 employees would be transferred to WHC upon close.
WHC is a restaurant operator and franchisor with 10 concepts, including fast casual Überrito, Tortuga Mexican Kitchen, and Williston Brewing Co.
In addition to Jundt, former CEO Berke Bakay is involved. Bakay, who led the brand from 2012 to 2018, helped WHC in its negotiations with Kona Grill and loaned the company $2.03 million through his BBS Capital Fund L.P. He became a member of WHC’s board of directors as well. Bakay’s time with Kona Grill was one of its most lucrative. The brand’s stock more than quadrupled in the three years after he was named CEO.
As The Phoenix Business Journal pointed out, little, if any, of the $20.3 million Kona gets in the deal will make it to shareholders. That’s something the company warned in the spring. KeyBank National Association, which held a large portion of Kona’s debt, will earn more than $16.5 million from the sale.
The brand owed more than $74 million to a total of 13,545 creditors when it declared bankruptcy. The majority were vendors and landlords.
Kona Grill’s sales slid into the chapter 11 filing. Same-store sales dropped 12.3 percent in 2018 after declining 5.9 percent in 2017. This after six consecutive years of comparable restaurant sale increases.
Revenue fell 12.4 percent in the fiscal year that ended December 31, year-over-year.
Kona Grill swung a net loss of $31.968 million last year compared to $23.432 million the previous year. That’s 20.4 percent of restaurant sales.
Average-unit volumes dropped to $3.492 million in 2018 from $4.119 million the previous year. EBITDA was negative $15.9 million.
Before its bankruptcy filing, Kona Grill named Jonathan Tibus, managing director with turnaround firm Alvarez & Marsal, CEO, effective April 17. He previously served as CEO of Real Mex Restaurants (Chevy’s, El Torito, Sinigual, and Las Brisas), and led the since dissipated Ignite Restaurant Group (Joe’s Crab Shack and Brickhouse Tavern) and Last Call Operating Co. (Fox & Hound, Champps). All of those companies filed for bankruptcy protection. Tibus also served as chief restructuring officer at Quiznos, a quick-service brand that emerged from bankruptcy in 2014, and chief operating officer of Max & Erma’s, which filed for chapter 11 protection in 2009 and nearly shuttered all of its restaurants.