Five Burger King restaurants set to close for good
Tuesday, 12 May 2020
Five under-performing Burger King restaurants in Wellington and Auckland could be closed for good as receivers seek to strike a 'compromise' deal with the company's creditors
Burger King's New Zealand owners, Tango New Zealand Ltd, went into receivership on April 14 after the fast food chain took a significant hit during the coronavirus lockdown
The receivers, KordaMentha's Grant Graham and Brendon Gibson, said at the time the aim was to get the business restarted post-lockdown, and then sell it.
To prepare for the sale, creditors, including restaurants' landlords, have been asked agree to a compromise deal, which would see them receive some of the money they were owed.
**READ MORE:
* Burger King failed to compete with McDonald's and KFC
* Coronavirus: Burger King NZ owners in receivership, hopes of sale
* Police happy with behaviour after Extinction Rebellion protests in capital
**
The deadline for the compromise deal to be struck was Tuesday evening.
The restaurants proposed for closure are those in Courtenay Place and Lambton Quay in Wellington, and Queen St, Takapuna and WestCity Mall in Auckland.
Documents lodged at the Companies Office on May 6 show $50 million is owed to the senior lenders.
The receivers have previously said the lenders are a consortium of ANZ, ASB and Rabobank.
The banks support the compromise deal, and have agreed to share half of any sale proceeds over $30 million if the company is sold as a going concern.
They have also forgiven some interest payments and provided an overdraft to assist in the restart of the business.
At April 1, the company had other creditors of approximately $11.8m, plus monthly rents of $1.7m it could not meet, compromise deal documents said.
The receivers estimated the business would remain cashflow-positive until December if the creditors' compromise went ahead.
The compromise deal paperwork showed how Burger King ended up in the hands of receivers.
'As at 1 April 2020, the Company had creditors of approximately NZ$11,800,000 plus monthly rents of approximately $1,700,000 which it cannot meet at present,' they said.
'Even though the business has now restarted, it will take time for the Company to reach its pre-lockdown trading levels and there is uncertainty as to how quickly trading will recover.
'The Alert Level 4 lockdown meant the business had to shut its doors for over 4 weeks and therefore was unable to pay its debts outstanding as at 1 April 2020 in the normal course of business.'
'The Company’s ultimate shareholders have advised they will not be putting any further equity into the business.'
That shareholder is private equity investor Blackstone based in London's Berkeley Square.
That meant the company had breached its loan agreements with the banks.
The Australian master franchisor BK AsiaPac PTE is backing the deal.
Throughout the level 4 lockdown, the company received the Government wage subsidy, allowing it to pay its staff at least 80 per cent of their normal wage for 12 weeks, which enabled the company to reopen 71 of its 83 restaurants when the alert level was reduced to level 3.