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Krispy Kreme Doughnuts, Inc. Message Board

  • chmchmchm2 chmchmchm2 Aug 23, 2005 3:20 PM Flag

    Request of Our Fabulous Research Dept

    We seem stuck around 7. Seems its going to take a blast of news to get us moving lower again. A lot of the posts from our research department (Di et al) have debated a lot of dates. Perhaps you could just post a list of the key dates you see coming up that just might generate some news.

    Thanks in advance.

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    • ok... so it looks like this section (g) is irrelevant, and it was indeed a may 1st assessment...

    • Yes, this is what I was looking at.

    • I'm thinking there might still be a bit of room to argue against the "as-of" May 1st thing but I need a piece of info first:

      I found the paragraph below in the 1st lien documents. It does not sound to me like 2 "wildcard CEBITDA calculation dates" as di_vur suggested, but rather, 2 "surprise" inspections of the calculation of the monthly CEBITDA.

      di_vur, was this what you were looking at or is there something I am missing a similar paragraph?

      (g) if requested by the Collateral Agent, up to two times in each
      Fiscal Year at the cost and expense of the Borrower, a report of an
      independent financial firm selected by the Collateral Agent (which may be,
      or be affiliated with, one of the Lenders) with respect to the calculation
      of Consolidated EBITDA, which report shall indicate that, based upon a
      review by such firm of the relevant books and records of the Borrower
      containing the information regarding Consolidated EBITDA that is set forth
      in the Borrowing Base Certificate delivered by the Borrower as at the end
      of the most recently ended fiscal month, such Consolidated EBITDA has been
      calculated in all material respects pursuant to the requirements of this
      Agreement;

    • ok...

      my understanding is that an secured creditor cannot file a petition for involuntary ch.11. And KKD's unsecured creditors are getting paid because KKD has liquidity now so they won't file either. So, it looks like this is gonna end up in a voluntary ch.11, perhaps a pre-pack.

      so in theory we have either:

      a) KKD goes in default. SP calls in the loan immediately. this means cash crunch for KKD because they don't have $150mm to pay SP. so they file voluntary ch.11.

      b) scenario (a) is foreseen in advance, and a pre-pack is negotiated prior to filing ch.11, and then they file.

      c)assessment of insolvency leads BOD to judge that they have to protect creditors. i.e. close stores and prevent franchisee guarantees from mounting, i.e. chapter 11.

      is this an accurate listing of the possibilities at this point?

    • that was extremely helpful, thanks.

      is there such thing as permanent uncured default where the creditor says "you're in default, we feel like doing x, ok now we want you to give us y, ok now z" etc etc, where the creditor takes full control or would that be blocked by some kind of request for arbitration (or protection from creditors ch.11)

      <<No, default not necessary to file a bankruptcy petition - but one usually exists or is imminent >>

      I guess you say this w.r.t voluntary ch.11, which is what happens in most big corporate bankruptcies. Do we even care about the possibility of involuntary filing here? To file an involuntary petition SP would need 3 unsecured claims...no?

    • I don't think they get 30 days. I think it's immediate.

    • <<after your boilerplate 30 day grace peroid when it qould become hard default, provided no waiver agreement is reached. Of course this would all be on the advice of counsel who I assume is Weil Gotcha.>>

      first of all, wouldn't KZC wait for the entire 45-day period to hand in the MFS (Modifed Fin. stat.)?
      That would take us at least until September15th for a technical default. actually, an event of default has to be contuing for 5 business days, according to the loan docs, so it's sept. 20. So October 20th would be a hard default. (october 17th is 3 days before that, by the way)

      <<Re Weil, I just assume they've been advising the special committee re solvency and obligations to creditors all along. It's what they're best known for. >>

      do you think it's possible the Weil advised the SC to hurry up and finish the report by arguing:
      1)you are insolvent
      2)therefore the creditors might want ch.11
      3)therefore there must be disclosure soon
      4)therefore you gotta finish up the report

      <<I suggest you should assume, from here on in (until bankruptcy petition), there will not be any point in time where loan covenants are satisfied.>>

      when there's a technical default and it is waived in return for higher interest or whatever, the company is no longer in default, is it? what's a hard default? why is it 30 days? how does hard default change things? is it needed to do a ch.11?

    • Thanks.

      As for Weil, I think they've only been advising the SC on its investigation up to now, not advising the company. Now, as I said, they're free to take on other work, and as you say they're highly experienced.

    • >> provided no waiver agreement is reached.

      That's really my question. Suppose a default occurs but is waived, with some sort of consideration in the form of present or future payment. Doesn't that need to be reported?

      >> counsel who I assume is Weil Gotcha.

      Interesting... here's somebody who had an incentive to hurry up and finish the SC report. Until the report was finished, Weil as counsel to the Special Committee probably was excluded by conflict of interest from being the company's lawyer. Now that job is finished... just around the time that the company seems to be nearing default under its loan documents... voila!

    • Even with Cooper's cavalier (I'm being generous here) attitude toward SEC disclosure, wouldn't a default notification either to or from a lender be the sort of event he'd feel compelled to disclose?

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