The owner of P.F. Chang’s Bistro said now “is an exciting time to explore a sale,” a move that could help the chain deal with debt burden of about $680 million. Centerbridge Partners and the Board of Managers of Wok Parent LLC announced they have retained BofA Merrill Lynch and Barclays to explore a potential sale of the Asian chain, which Centerbridge acquired in 2012 along with fast casual Pei Wei in a deal valued at $1.1 billion. The firm recently completed P.F. Chang’s operational split from Pei Wei, placing two separate teams in charge of the chains and making them independently operated businesses.
Pei Wei also moved its headquarters last August from Scottsdale, Arizona, to Irving, Texas. It then hired John “J.” Hedrick, formerly the COO of NCP International—an operator with 1,300 Pizza Hut and Wendy’s locations—as its new chief executive officer in January. Next came CFO and CMO changes, as well as IT and HR executive moves. Most recently, the brand unveiled a new prototype as brand of a 360-degree brand review. Read more about the changes here.
Steve Silver, the global co-head of private equity at Centerbridge, said P.F. Chang’s has received multiple unsolicited indications of interest.
“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,” he said in a statement.
P.F. Chang’s has 214 U.S. locations, and franchises another 93 units in 24 countries worldwide. Restaurants are generating average-unit volume of $4.1 million. The brand said earlier in the year it planned to open six to eight restaurants in the U.S., and an additional 12–15 restaurants globally 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.
Bloomberg said P.F. Chang’s current performance is 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.
“The news pushed the company’s bonds higher, with senior unsecured bonds trading at about 90 cents on the dollar—still reflecting doubts among investors about whether they’ll be fully repaid,” Bloomberg said.
“We have enjoyed a very positive partnership with Centerbridge and are excited to tell prospective buyers about the company’s heritage, its attractive positioning in full-service Asian dining, the operational strengths of the business that we have built during Centerbridge’s ownership and its exciting growth prospects,” added Michael Osanloo, P.F. Chang’s CEO, in a statement.
P.F. Chang’s has made two company firsts in recent months. In late June, the brand opened its first location on a U.S. Armed Forces base when it debuted on Ramstein Air base in Germany. In May, the company opened its first China unit at the No1 Mall on the iconic Nanjing Road in Shanghai.
P.F. Chang’s was founded in 1993 by Paul Fleming and the Chef Philip Chiang.