Tilman Fertitta, the billionaire owner of Landry’s Inc., one of the country’s most prominent full-service restaurant groups, is floating some bold measures to keep his entertainment empire afloat during the COVID-19 pandemic.
According to Bloomberg, which cites people with knowledge of the matter, Fertitta, who also directs Golden Nugget casinos and owns the NBA franchise Houston Rockets, is looking to raise more debt and is offering potential lenders an interest rate of 15 percent to participate in a new $250 million loan.
The loan, which matures in October 2023 and is being arranged by Jefferies Financial Group Inc., per Bloomberg, is one of several steps Fertitta is taking to shore up liquidity. Landry’s announced in mid-march it furloughed 40,000 employees, or 70 percent of the company’s workforce. This as restaurants—a vast portfolio that includes Saltgrass Steak House, Bubba Gump Shrimp Co., Claim Jumper, Morton’s The Steakhouse, McCormick & Schmick’s, Mastro’s Restaurants, and Rainforest Café, among many others—were bringing in just 4–5 percent of normal sales on takeout-only models during the early days of COVID-19. All the casinos shut down as the company was burning $1 million a day.
Landry’s has already drawn $300 million of existing credit lines in full. Bloomberg added Fertitta himself is injecting $50 million of his own cash into the business, according to a source.
Based on initial discussions with investors, the loan is being offered at a spread of 14 percentage points over the benchmark London interbank offered rate and at a discount of about 96 cents on the dollar, the publication noted. The spread is the highest ever seen in the U.S. leverage loan market excluding companies in bankruptcy, according to Bloomberg data.
The new loan would serve as (a very expensive) insurance policy in the event that none of Fertitta’s businesses can reopen before the end of the year.
Bloomberg said the leverage loan market has been slower to recover in recent weeks compared to the high-yield bond market, which reopened last week to borrowers. The cost of borrowing soared, however.
Two months ago, Bloomberg said, sentiment in the credit market was so strong that debt investors allowed Fertitta to take a $200 million dividend out of the company, doubling the size originally targeted