Boston Chicken's stock dropped Friday after the beleaguered fast-food chain posted a steep third-quarter loss and alerted investors that bondholders are seeking to exchange debt for all of the company's equity.
The company lost $3.79 a share for the quarter, including charges.Results were hit by charges totaling $260 million related to its Chapter 11 bankruptcy filing in October. It also said sales and customer counts continue to decline from year-ago levels as a result of bad publicity. Cash flow was improved during the third quarter, according to the company.
The charges nearly equaled Boston Chicken's (BOSTQ) third-quarter revenue of $261 million. The company posted earnings of 16 cents a share in the year-ago quarter. Its year-to-date net loss is $727.9 million, or $9.93 per diluted share.
Boston Chicken said it's working to reduce its $900 million debt load by about two-thirds by exchanging three debt issues totaling $627 million for equity.
Its creditor committee, which consists primarily of bondholders, told the company that it's willing to exchange convertible subordinated debentures and other unsecured debt for all the equity of the reorganized company.
Axccording to Chief Financial Officer Lawrence E. White, "Although the company is exploring alternatives to preserve some value for existing stockholders, there can be no assurance that existing stockholders will retain any value."
The chain also said Nasdaq has warned that the company may not be in compliance with the net-tangible-assets requirement for listing on the exchange. The shares have also failed to meet the $5 minimum-closing-bid standard, which would exempt it from satisfying the net-asset requirement.
A Nasdaq compliance hearing is scheduled for Nov. 19. Company officials said that "there can be no assurance that the hearing will result in continued listing of the common stock on the Nasdaq National Market."
Colorado-based Boston Chicken, which owns and franchises nearly 900 fast-food locations in 38 U.S. states, also operates a prepared-foos subsidiary and owns a majority stake in Einstein/Noah Bagel Corp. (ENBX).
Written By Ron Feemster