A lifeline for Ignite Restaurant Group could be in the works. Citing unnamed sources, Debtwire said Landry’s and American Blue Ribbon Holdings have emerged as possible buyers for the struggling company’s two casual dining brands, Joe’s Crab Shack and Brick House Tavern & Tap.
Debtwire reporter Danielle Randall told The Houston Chronicle that "In terms of value, it would be synergistic."
Bankruptcy has been be on the table for Ignite Restaurant Group, which was delisted from the Nasdaq Stock Market in March and reported comparable sales declines of 14.3 percent year-over-year at Joe’s and 12.6 percent at Brick House in the first quarter.
Securities and Exchange Commission filings showed that Ignite’s forbearance agreement was extended to Tuesday, meaning the decision could arrive shortly. Debtwire also reported that Ignite is considering a debt-for-equity swap with its lender base.
Tilman Fertitta, owner of Houston-based Landry’s, actually once owned Joe’s Crab Shack before selling it to JCS Holdings LLC 11 years ago. The private equity firm forked up $192 million for the purchase. Landry’s operates more than 50 brands, including the eponymous Landry’s, Morton’s The Steakhouse, McCormick & Schmick’s, and Rainforest Café. Nashville-based American Blue Ribbon Holdings owns O’Charley’s. Bakers Square, Village Inn, 99 Restaurant & Pub, and Legendary Baking.
Ignite announced earlier in the year that it was working with Piper Jaffray to sell either one or both of its brands.
Revenues fell 20.9 percent at Joe’s to $76.1 million in the first quarter versus $96.2 million in the first quarter of 2016. Brick House reported a 12.4-percent drop to $19 million versus $21.7 million. As of April 3, there were 112 Joe’s and 25 Brick House stores, down from 130 and 26, respectively, from March 28, 2016. Average weekly sales decreased $5,000 at Joe’s and $9,000 at Brick House in that time.
During its first quarter filings, Ignite said addition declines “could cause us to close or sell more restaurants which may require us to recognize additional assets impairment or closure-related expenses and increase our valuation allowance during 2017 against some or all of our deferred tax assets.”
At the same time, Ignite admitted bankruptcy was possibly in the cards. “It is possible that even a successful and efficient implementation of the recapitalization initiatives we are pursuing will require us to make a filing for protection under the U.S. Bankruptcy Code,” it said in the filing.
Ignite has around $121 million in debt. Randall told The Houston Chronicle that the one of these transactions could help the company potentially avoid bankruptcy.