Checkers Drive-In Restaurants Inc. said late Friday that it is behind on a loan and expects its banks to sell the fast-food company's outstanding debt to another lender.
If that deal does not occur, Checkers said it will be in default on a bank loan that so far this year has required the company to pay back more than $5.5-million in principal and interest. Checkers had pledged the company's assets as collateral for the loan.
Checkers said that once its debt is sold, it plans to renegotiate the loan with its new lender before July 31 "to establish a repayment schedule that Checkers will be able to meet in light of its current financial pressures."
Checkers did not name its current lenders and identified the expected buyer of its debt only as a "capital management firm in the northeast U.S." Checkers management could not be reached for comment.
Checkers' loan problems come a month after the company's annual meeting where executives suggested the company could turn a profit soon, but where testy shareholders criticized corporate performance.
Checkers shares Friday closed up 6\ cents at $1.09] before the company reported the status of its loans.
Checkers agreed with its banks in 1993 to borrow about $50-million, a loan later secured with all of the company's assets. At the end of March 1996, the company had borrowed $36.2-million. It had agreed to pay back $5.6-million this year, $7.8-million in 1997, $4.2-million in the first half of 1998, and the remaining $18.6-million by July 31, 1998.
The need to make such large payments, Checkers said, "has hampered the company's ability to respond to the recent marketing blitz in the fast-food industry" and hurt its sales.