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Krispy Kreme Doughnuts, Inc. Message Board

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  • di_vur_se_fi di_vur_se_fi Jun 17, 2005 12:33 AM Flag

    Stephen Cooper's strategy

    Nice post.

    Others here have hypothesized that bk (voluntary by cooper) has not happened to date because it can't, i.e. a certain amount of time has to pass before the previous lenders (the Wachovia syndicate) are protected.

    Regarding failing franchisees, my read of the loan covenants is that kkd is restricted to $15 million in capex and $6 million in acquisitions. How will they finance the asset purchases of the potentially bankrupt franchisees? Are you assuming that Silver Point will allow such transactions (because it fits your hypothesis of their end game motivation)?

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    • They will not finance those franchisees - they will essentially just assume them.

      The franchisees are desperate and it is a game of whether they give up first and say OK - $1 or $50 thousand for you worthless franchise operation otherwise you file bankruptcy.

      Zip

      • 1 Reply to zipperdydoodah
      • First of all, the loan covenants only allow $6 million in acquisitions; payables from the franchisee (I am quite confident that any franchisee in trouble would have large payables to kkd) would count against this number, so even if kkd only pays out $1 in cash, the "acquisition" would be for much more.

        Second, if I'm a desperate franchisee, what's the difference between bankruptcy and selling out for a pittance. Either way I've lost my equity, right? Why would I sell out (and see kkd benefit) when I probably wouldn't be that much worse off in bankruptcy (and see kkd suffer)?

    • It could be simple. You keep running until you run out of cash. They are still milking this mad, unhappy cow. Then you go bankrupt.

 
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