Dave & Buster’s, which plans on permanently laying off more than 1,300 workers, said in a filing that bankruptcy may be next if it can’t strike a deal with lenders.
In April, the brand negotiated a debt-relief deal for Q1, Q2, and Q3. During the suspension period, Dave & Buster’s is required to maintain at least $30 million in liquidity. If the chain isn’t in compliance after the suspension period or another event of default arises, lenders could seek remedies. The lenders may waive default or offer forbearance, but they aren’t obligated to do so.
“Failure to obtain additional waivers would have a material adverse effect on the Company’s liquidity, financial condition and results of operations and may result in filing a voluntary petition for relief under Chapter 11 of the United States Bankruptcy Code to implement a restructuring plan,” the eatertainment chain said in the filing.
In Q2, same-store sales plummeted 87 percent. The company also posted a net loss of $58.6 million, or $1.24 per share compared to net income of $32.4 million in Q2 2019. Revenue dropped 85 percent from $344.6 million in 2019 to $50.8 million this year.
The eatertainment chain said during its earnings call that 89 of its 137 stores are open, or about 65 percent.
The 1,369 layoffs come across several states including multiple locations in Massachusetts, Colorado, North Carolina, and Michigan, according to states’ Worker Adjustment and Retraining Notification filings (WARN). The hardest hit states are Michigan where units in Livonia, Utica, and Kentwood are losing a combined 311 workers, and Massachusetts where locations in Woburn, Natick, and Braintree are losing a combined 307 employees.
In a letter to the state officials, Kathryn Rainey, senior director of human resources, said the employees were temporarily furloughed beginning March 16-18. However, due to “unforeseeable business circumstances” furloughs are becoming permanent.
“We are taking this action because of COVID-19 related business circumstances that were not reasonably foreseeable,” Rainey said in the letter. We did not foresee how significantly and for how long a time the pandemic and related governmental lockdown orders would impact our business. We also did not foresee that lockdown orders, initially issued for short durations in only a few cities, would spread throughout the country and be repeatedly extended.”