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Krispy Kreme Doughnuts, Inc. Message Board

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  • zipperdydoodah zipperdydoodah Jun 17, 2005 6:03 PM Flag

    Stephen Cooper's strategy

    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.


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    • 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)?

      • 1 Reply to di_vur_se_fi
      • The first condition is being waived by Silverpoint. They do not mind acquiring whole franchises. They just refuse to let their cash be paid out.

        The second thing is the problem. Why would a franchisee sell this thing for $1. There is no difference between that and letting the franchisee go bankrupt.

        KKD is offering sums like $50 thousand and the franchisees are holding out for sums like $1-5 million.

        If you could clean up all the franchisees at $50 thousand each (less than $1 million total) and then let it go bankrupt Silverpoint will wind up owning a MUCH better business.


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