Nathan's Famous, Inc. (NASDAQ:NATH), the well-known American fast-food company, has entered into a new credit agreement providing a $70 million credit facility, as detailed in a Securities and Exchange Commission (SEC) filing on Wednesday.
This financial maneuver includes a $60 million term loan and a $10 million revolving credit line, with an option for an additional $10 million increase subject to lenders' consent.
The new credit facility, secured with Citibank, N.A. as the administrative agent, will mature on July 10, 2029. Nathan's Famous utilized the term loan to refinance its existing 6.625% Secured Notes due in 2025, which were called for redemption on the same day. The company deposited funds with U.S. Bank Trust Company, National Association, ensuring the redemption of the notes on August 14, 2024, at 100% of their principal amount.
The refinancing action released the company and guarantors from obligations under the 2017 indenture, including collateral securing the existing notes, except for obligations that survive according to the indenture terms.
The credit agreement stipulates that the term loan will be repaid in quarterly installments starting September 30, 2024, and includes interest rates options tied to the base rate plus an applicable rate or Term SOFR plus an applicable rate. Moreover, the company will incur a 0.20% annual fee on the undrawn portion of the revolving credit line.
Nathan's Famous is also bound by financial covenants under the new agreement, which require maintaining a Consolidated Fixed Charge Coverage Ratio not exceeding 1.20 to 1.00 and a Consolidated Net Leverage Ratio not exceeding 3.00 to 1.00, effective from the fiscal quarter ending September 29, 2024.
The credit facility's covenants impose restrictions on the company's ability to incur additional indebtedness, liens, asset sales or acquisitions, business changes, related-party transactions, certain investments, and restricted payments. The obligations under the credit agreement are unsecured, but a default could lead to the lenders terminating their obligations and declaring the balance due.
This financial restructuring is a significant move for Nathan's Famous, which operates in the retail eating places industry under the SIC code 5812. The information is based on a press release statement.
InvestingPro Insights
Nathan's Famous, Inc. (NASDAQ:NATH) has shown a prudent approach to financial management, as evidenced by its recent credit facility agreement. Adding to this, InvestingPro data indicates a stable financial outlook for the company.
With a moderate Price-to-Earnings (P/E) ratio of 14.61, which has slightly adjusted to 14.45 in the last twelve months as of Q4 2024, investors may find the stock reasonably valued given its earnings. The company also boasts a healthy revenue growth, marking a 5.98% increase in the last twelve months as of Q4 2024, reflecting its ability to expand its income streams effectively.
InvestingPro Tips highlight several strengths of Nathan's Famous. Notably, the company has upheld its commitment to shareholders by maintaining dividend payments for eight consecutive years, with a current dividend yield of 2.87%. Moreover, Nathan's Famous has a solid liquidity position, with liquid assets surpassing short-term obligations, and operates with a moderate level of debt, which aligns with the company's cautious financial strategy as seen in the recent refinancing action.
For investors seeking more in-depth analysis, InvestingPro offers additional tips for Nathan's Famous, which could provide further insights into the company's financial health and investment potential. Interested readers can explore these tips and benefit from a special offer using the coupon code PRONEWS24 to get up to 10% off a yearly Pro and a yearly or biyearly Pro+ subscription.
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