Debt-Burdened P.F. Chang’s Reportedly Sold
P.F. Chang’s is officially on the move again. The Chinese chain entered into an agreement to be sold to TriArtisan Capital Partners LLC and Paulson & Co. Inc, according to a private notice sent to investors and reported on by Bloomberg News. Bloomberg revealed Monday that the company was near a sale for about $700 million from its current owner, Centerbridge Partners LP.
Per the notice, the deal is expected to close in the first quarter of 2019.
P.F. Chang’s more than $675 million of total debt will be taken out at par, according to the notice. Additionally, fast-casual Pei Wei Asian Diner, which was spun off by Centerbridge and given its own leadership team, will remain with the company. Centerbrige acquired both brands in 2012 in a deal valued at $1.1 billion. Pei Wei moved its headquarters last August from Scottsdale, Arizona, to Irving, Texas, and then hired John Hendrick, formerly COO of NCP International—an operator with 1,300 Pizza Hut and Wendy’s locations—as its new chief executive officer in January 2018.
P.F. Chang’s liabilities include about $375 million of secured debut, including $5 million of capital leases, a $317 million first-lien term loan, $25 million of revolver borrowings, and $28 million of secured notes provided by the sponsor. Its borrowings also include $300 million of unsecured bonds, Bloomberg reported, citing “people with knowledge of the matter who asked not to be identified discussing a private matter.”
Bloomberg said notice of the sale agreement sent the company’s bonds higher, with the senior unsecured bonds due 2020 climbing more than 4 cents on the dollar. Bloomberg used Trace bond trading data for the information.
Centerbridge declined comment to Bloomberg.
P.F. Chang’s currently operates 214 locations in the U.S. and franchises another 93 in 24 countries worldwide. Bank of America Merrill Lynch acted as lead financial adviser to P.F. Chang’s, while Barclays also acted as a financial adviser.
Back in July, Centerbridge said it was “an exciting time to explore a sale.”
“We have a deep, talented team and compelling growth initiatives, including unit expansion of both our domestically operated and international franchise businesses, which together provide a powerful opportunity to capitalize on the strength of our brand and high quality menu,” Steve Silver, the global co-head of private equity at Centerbridge, said at the time.
P.F. Chang’s, at that report, was generating average-unit volumes of $4.1 million in its restaurants. The brand planned to open 12–15 units in 2018.
Before the 2012 sale to Centerbridge, P.F. Chang’s reported a 42 percent drop in first-quarter profit to $6.3 million, Revenue was $318.9 million as guest counts sagged. The brand was “fighting to recover from ill-timed price increases,” Reuters reported at the time. P.F. Chang’s was founded in 1993 by Paul Fleming and the Chef Philip Chiang.
When the sale process first became public, Bloomberg said P.F. Chang’s performance was drawing skeptical reviews from credit raters, including Moody’s Investors Service, which said cash is eroding and the brand could have trouble refinancing bonds that come due in June 2020. If that effort fails, P.F. Chang’s could face demands for immediate repayment of its bank loans, according to the April report. S&P Global Ratings guessed in March that P.F. Chang’s could ask holders to swap bonds for new debt at less than full value to ease the burden, and that they’d recover little or nothing if there’s a default.