Monday, January 12, 2009

Too Much Bad Fish Scuttles Landry's LBO

Landry's stock tumbled today to an all time low of $6.63, before regaining a little and closing 50% down after announcing in a very cryptic press release that it is cancelling its LBO/MBO with Fertitta Holdings, the family that own Station Casinos (where you can book a vegas room for $40/night indicating just how hot the strip is right now), and Tilman Fertitta, current President/CEO of Landry's. If one reads the PR issued earlier, one will end up scratching a big bald spot in one's head... Turns out the MAC was having to disclose the terms of the "confidential" commitment letter:

"The SEC was requiring the Company to disclose certain information from a commitment letter issued by the lead lenders to Fertitta Holdings[.] The commitment letter issued by the lead lenders required that such information not be disclosed and be kept confidential. Although the Company informed the SEC of the foregoing and requested confidential treatment of the information, the SEC insisted upon disclosure of the confidential terms. When the lead lenders were informed of the SEC’s position, the lead lenders advised both Fertitta and the Company that the lead lenders would not agree to disclosure of the confidential information and that any disclosure by the Company or Fertitta would be in violation of the terms of the commitment letter and result in the lead lenders terminating their commitments for both the going private and alternative financing transactions."

Now this is about as odd as odd comes, as even the greenest lawyer would assume the SEC would want full disclosure in a going private deal. One knows how fond Jefferies is of issuing Highly Confident/Committed/Contingent Letter, so is it possible that something along these lines ended up scuttling the deal? Parallel to the going private process, the company is refinancing its $400mm of 7.5% December 2014 notes, and it seems which process seems to be on track but due to the lack of legal foresight in the MBO, is there something very scary here too? The bonds are quoted at par on TRACE, but if that price is right, and if the refi process was vetted with the same due diligence as the MBO, four out of five analysts bet the bonds wont be wrapped around par for too long... Sphere: Related Content
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