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Krispy Kreme Doughnuts, Inc. Message Board

  • mememe765445 mememe765445 Feb 6, 2006 7:41 PM Flag

    GI Affidavit Available

    Northern District of Illinois, case # 06-00932

    https://ecf.ilnb.uscourts.gov/cgi-bin/login.pl?100685994263359-L_786_0-1

    see the Declaration (document #3)

    - GI had 1340 wholesale customers
    - revenues for first 3 Q's of FY06 = 33mm down from revenues for FY05 was 50mm. Extrapolating to $44mm annually gives us around 42k per week AUV

    - 5.8mm owed to US Bancorp - senior secured. 74% guaranteed by KKDC.

    - GE owed 4.7mm - secured by equipement and leasehold improvement. KKDC guarantee 33%

    - obligation to KKDC 8.8mm + 4.3mm

    - unlike the FR affridavit, decline is blamed on the wholesale business! (escalating distribution costs)

    - all 3 commisaries shut down

    - Spoor is buying for $10mm: leases, equipment, rights. No owned real estate!

    - the debtor seeks to reject 7 leases. ok we still have that 1 store differential here...

    - the debtor does not have "liquidity to pursue a restructuring path" so they want to sell the entity

    - KKDC will do a DIP

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    • Remo, get on this guy, he's agreeing with me. Tell him about your franchise experience.http://finance.messages.yahoo.com/bbs?.mm=FN&action=m&board=1600706247&tid=krem&
      sid=1600706247&mid=169402

    • http://www.vanderbilt.edu/Econ/faculty/Daughety/mfn.pdf A little light reading on Most Favored Nation Clause. When skimming the article I even saw the franchisor/ franchisee relationship referred to.

    • I would doubt KKD could change the franchise agreement. It is a legally binding contract. Changing it would involve agreement by ALL franchisees. If one gets a break on pricing the rest can file suit for the same terms.

    • The Missoula opening (100,000 population) made no sense. LS and Kroll seem to have a pretty close working relationship.

    • Oh surely KK would have filed an 8-K if they had made a material change in a franchise agreement.

    • 10 months of fy06:

      (using expenses as proxies for transfers to kkd)
      $1.95 million in royalties and brand
      $10.95 mix and packaging

    • mung,

      that's exactly what I was thinking. 3 more things to add:

      1)LV is a 24/7 town

      2)More pricing power because people spend tons of money anyway in Vegas

      3)by his own admission:

      http://www.reviewjournal.com/lvrj_home/2005/Dec-18-Sun-2005/business/4442960.htm
      l


      <<Question: Could your business model have been equally successful elsewhere?

      Answer: There's no question Las Vegas is largely responsible for our success.>>

      di_vur,

      - I'm not suggesting Spoor is prudent (if he were he'd have paid down some debt at various points in his career)
      - I'm not suggesting he's smart (if he were, he'd not have opened Missoula and Billings.
      - I'm not saying he's honest. he clearly lacks intergity

      I'm just suggesting that he's lucky because he got the Vegas territory.

      Are you refering to the mortgage not have been paid off as a proof he's not gushing out cash? Those investment bankers, you know, they always like to talk about how a business "can support a certain amount of leverage".
      So I'm not yet convinced...

      pers,

      thanks. now we have to find out what's going on inside the vegas factory stores.

    • The stand at TI is never crowded. Last Sept., when I was there I asked the workers and they said there was too much competition with all the other higher end bakeries that every casino has.

    • Good work, meme.

      I had not been able to find this filing (it's been sitting there since Friday) because I've been trying to get there thru the US Index which doesn't yet have it.

      Anyway, here's what I see:

      -non-kkd debt of $11.1 million (this is down about $1.5 million from the q2 fy04 10-q)
      -kkdc guarantees of $6.6 million on the above debt (this is down about $2.2 million from the q2 fy04 10-q, but does not include lease guarantees which may or may not exist)
      -promissary note owed kkdc of $8.8 million
      -notes payable to kkdc of $4.3 million

      In a discussion with Protector, I had tried to guesstimate the obligations; I had assumed that the debt and guarantees would be at least unchanged (they've dropped a bit) and I pointed out the notes receivable which have never been retired. I went on to speculate that a/p to kkd would be about $10 million.

      Now, at first blush, one might conclude that the $8.8 million promissory note above is a proxy for a/p (and it is, in a sense). However, there is still a huge piece missing and that's the explicit a/p to kkdc.

      How can we estimate that?

      In one of the other documents, total liabilities are estimated at $35.5 million. If you add up the bank debt (11.1) and the promissory note (8.8) and the notes receivable (4.5), you get $24.4 million. Now, what about the 20 largest unsecured UNRELATED creditors? Eyeballing these adds up to less than $1 million. Throw in another million for wages and taxes, etc... and we still have a $9 million gap.

      In other words, I would say that kkdc is owed the following by GI:

      $8.8 promissory note
      $4.3 notes receivable
      $9.0 a/p

      = $22.1 million

      Additionally, kkdc will have to cover the $6.6 million guarantee and, if other ADs are any indication, possibly cover all the debt to USB and GE Capital (another $4.5 million).

      In other words, kkdc will basically have to cover or write off nearly the entire $35.5 million, net of the proceeds from Westward Dough.

      • 4 Replies to di_vur_se_fi
      • The balance sheet is slightly different that the following from the affidavit:

        -non-kkd debt of $11.1 million (this is down about $1.5 million from the q2 fy04 10-q)
        -kkdc guarantees of $6.6 million on the above debt (this is down about $2.2 million from the q2 fy04 10-q, but does not include lease guarantees which may or may not exist)
        -promissary note owed kkdc of $8.8 million
        -notes payable to kkdc of $4.3 million

        The debt in the balance sheet is $14.8 million, so we don't know what the extra $3.7 million represents.

        ----

        My guesstimate of a/p was way off (I said $9 million). The amount listed is $1.6 million; also, an extra $0.7 million is attributable to the promissory note (accrued interest) and we don't know if kkd has exposure through the $3.7 million in debt listed above. As of now, though, the kkd non-cash exposure is somewhat less than I had speculated in the previous post.

      • Di_vur, there are full balance sheets and income statements in one of the filings. They're pretty voluminous, but I'm sure you'll do the digging. Sorry I don't have the reference right at hand.

      • <i>Additionally, kkdc will have to cover the $6.6 million guarantee and, if other ADs are any indication, possibly cover all the debt to USB and GE Capital (another $4.5 million).
        <i>
        If KKDC chooses to take all of the meager assets that are left over (real estate asset in 1 store...equipment in 8 stores...maybe a few balloons and T-shirts) then yes, they will pay off the entire debt. However, they may choose not to do that in which case I'm guessing those things will be auctionned (KKD will be one of the bidders anyway).

        so I think there will probably be a shortfall for lenders. KremeKo creditors only got paid because KKD wanted to take over.

        Spoor, IMO, is thinking of a long term territory flip. Suppose someone like MCD buys KKD with a big national strategy. They'd want to acquire all territories and Spoor would ask them to pony up if they want his states. If they can't expand a company "Westward", it'll be less viable.

        Or maybe he wants to be CEO and get a big salary so he can pay mommy back.

        di_vur,

        though GI's sales are similar to FR, FR came down froma much higher AUV originally, did it not?

        what do you make of the whole filing? Do you believe the commissary closings and wholesale scapegoat forshadow a move toward hub-and-spoke? do you think not having "liquidity to pursue a restructuring path" is just an excuse or an indication of real pain?

    • the debtor does not have "liquidity to pursue a restructuring path" so they want to sell the entity....Can I get a round of "Nyaa, nyaa, where's the BK?" from all the longs? Arbhole, gstringss, darnstockmarket and X-5-9, if I ever have a sinking luxury liner I want you guys rearranging the deck chairs.

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