Steak n Shake’s administrative loan officer disputes the company’s claim that it is “debt-free.”
Specifically, Wilmington Trust, National Association sued the Indianapolis-based fast food chain for more than $ 8.5 million in unpaid fees and interest from 2018 – funds it says Steak n Shake refuses to pay.
The unpaid charges relate to $ 220 million in loans that Steak n Shake’s parent company Biglari Holdings reportedly paid in February– help the channel avoid a bankruptcy filing which, at one point, seemed imminent.
The lawsuit, filed in New York federal court, promises to keep legal pressure on Steak n Shake and Biglari Holdings arising from the chain’s acrimonious debt issue. This is the third lawsuit related to the debt – Steak n Shake last week dismissed its lawsuit against Fortress Investment Group, the private equity firm that bought the chain’s debt and sought to push the business to file for bankruptcy.
Steak n Shake borrowed $ 220 million in 2014. Biglari Holdings, its parent company, has not repaid the debt. That debt has become a growing problem in recent years as the chain’s sales struggled, and the chain has spent much of the past year working hard to avoid declaring bankruptcy. Biglari Holdings finally paid $ 102.5 million in February to repay the amount owed, avoiding a deposit.
In a subsequent press release, Steak n Shake has declared itself “debt free” making it “one of the strongest companies in the restaurant industry”.
Wilmington disputed this description. “Unlike Steak n Shake’s position, Steak n Shake is not ‘debt free’ and the credit facility with the lenders has not been ‘withdrawn’ because there are millions of dollars in ‘bonds’ in suspense that Steak n Shake still owes to the lenders and Wilmington under the credit agreement, ”the company said in a filing.
According to the lawsuit, Wilmington was entitled to apply the Steak n Shake payment first to its fees and expenses as well as to the lenders. So, says Wilmington, Steak n Shake still owes money and its debt isn’t actually taken out.
Wilmington, in his lawsuit, claims Steak n Shake still owes nearly $ 3.7 million in damages, which could be characterized as debt the company owes on its credit facility or unpaid charges.
In addition, according to the firm, Steak n Shake owes $ 4.85 million in interest accrued since 2018. Wilmington says Steak n Shake has so far refused to pay such fees.
This is not the first lawsuit between Steak n Shake and Wilmington, who took over as the company’s debt administrative agent in May of last year. In August, Steak n Shake sued the company over Wilmington’s refusal to release liens on restaurants the company was trying to sell. A judge ruled in Wilmington’s favor the following month.
Steak n Shake had previously sued Fortress, which had acquired the company’s debt in the secondary market and was using its rights as a lender to take ownership of the chain. Fortress has been a particularly aggressive buyer of restaurants and other businesses using such “off the shelf” strategies.
Steak n Shake argued that Fortress initially expressed interest in acquiring some of the chain’s properties that were for sale last year in order to gain information about the business – which it then used to buy out. debt in order to take over the business. .