Looks like PZZI wants to payoff some loans early. Here is the wording of the changes to the agreement.
A. WHEREAS, Agent, the Lenders and Borrower entered into that certain Loan and Security Agreement dated as of August 28, 2012 (as amended, modified or supplemented, the “ Loan Agreement ”);
B. WHEREAS, Borrower has advised Agent and the Lenders that Borrower may partially prepay the Term Loans ;
C. WHEREAS, Borrower has requested that Agent and the Lenders (i) amend certain financial covenant definitions as set forth herein and (ii) modify some of the Scheduled Installments due on Term Loan A and some of the Amortization Amounts due on Term Loan B in the event of prepayment of a portion of either of such Term Loans on or before September 30, 2013; and
D. WHEREAS, the parties desire to amend the Loan Agreement as set forth herein;
NOW, THEREFORE, in consideration of the parties’ mutual promises in this Second Amendment, and for other good and valuable consideration, the sufficiency of which is hereby acknowledged, the parties agree as follows:
Maybe they have raised the $3M from some dilution and will retire some debt? This is some good news, they will save on some interest payments going forward. My last thoughts, maybe someone is looking at buying them out and would like these terms soften so that prepayment had to be worked out? What if five guys wanted this company? I'm just saying. Fun to dream.
I stated Pizza Inn would be sold before the year is out....Who knows.....I believe Pie Five will go private soon...Have you EVER known a start up to be anything but private?....They all lose money because of D & A, and just not for a short time....Never had I known of a start-up, unless it was part of a much, much larger company, that made big profits already be anything but private....And, why would Pizza Inn Holdings/Swartz want to give others a basically free ride??? P5 doesn't have the $$$ to support a huge roll out without huge dilution/debt....I believe the big roll out of sites is so it appeals to a buyer as oppused to a concept with just 1-2-3 sites and to give the appearance of success for potential franchisee's.
Disclaimer: Like many things, the following is extremely speculative.
I've been thinking through the prepayment scenarios as well and arrived at the same two that you mentioned. However, as I think through them a couple of interesting things come to mind that might support your acquisition angle. 1) Why would a growing company prepay debt with excess cash instead of rolling it back into the business to support further growth (debt prepayment should not be as beneficial to the business as growing the business...if it were, that would be a much different issue). 2) Here Comes the Speculation: About 6 weeks ago, I met a buddy at the Belt Line/Tollway Pie Five for lunch. Nothing unusual about the experience itself except that I noticed a table of guys in branded polo shirts. The brand was not one that I would expect to see at Pie Five either (kind of like seeing a Coca Cola guy drinking a Pepsi). The brand on the shirts: Papa John's. I know...purely speculation, but if Papa John's was simply researching an interesting young business that some might consider a competitor at this point (up for different debate), why would they ever be seen in branded polo shirts inside another pizza business??
Who knows, Pie Five may simply be refinancing their facilities for better terms, but it sure is fun to speculate about other possibilities. By the way, I don't love the acquisition angle because while it would likely mean a short-term win, some of the long-term upside might be compromised (especially, if it weren't Papa John's and it ended up going private).