Suppliers and landlords of Burger King are to forgo millions of dollars in payments from the chain's private equity owners as progress is made on a deal for its survival.
The owner of its outlets in New Zealand, Tango Holdings New Zealand, has been in receivership since April 14, with KordaMentha's Grant Graham and Brendon Gibson working to get the business up and running so they can sell it.
Under alert level 3, 71 outlets are open, with only 12 closed because they do not have drive-thru services.
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Gibson said at the time of receivership trade creditors were owed $15 million. Burger King has confirmed in a statement suppliers have been offered a deal to receive 75 cents in the dollar over six months, meaning almost $4 million in bills will be wiped, mostly from food companies.
The board of Tango's operating unit, Antares Restaurant Group, said in a joint statement with receivers that landlords would "provide some rent relief" but would not comment further.
The statement said "great progress had been made" on the deal, which would be formalised over the next two weeks and the business put up for sale.
One landlord BusinessDesk spoke to said he believed all landlords were asked to take 35-to-40 percent off their rent. He said he had accepted the deal and expected other landlords around the country would do the same.
"If I say 'go to hell', and everyone else says 'go to hell', then we've got empty buildings in a dead market," he said.
The fast-food chain's staff are employees of Antares, Unite Union national secretary Gerard Hehir said. That meant their holiday pay and other entitlements were not directly at risk because it is the parent, Tango, which is in receivership.
Antares received $11.5 million for 1,918 employers, according to the Ministry of Social Development's wage subsidy database, updated to April 22.
Hehir said on Friday staff had already begun to be contacted by Burger King management in preparation for opening.
$50 million owed
The union representative said the private equity owners hadn't invested properly in the business, which was profitable.
At the time of receivership, $50 million was owed to Tango's banks, a syndicate including ANZ, ASB and Rabobank.
Blackstone bought Burger King in 2011 for $108 million. According to the Tango accounts, some $6.7 million of share capital was issued in 2011, followed by another $16 million of redeemable preference shares in October 2013 when it restructured its debt.
In 2016, it beefed up its equity with another redeemable preference share issue of almost $92 million, although that included the conversion of some preference shares that had been recognised as debt.
Tango's most recent financial statements for the 2018 calendar year reported steady revenue at $188.3 million from $187.3 million but its loss was $72.3 million from a $3.1 million profit the year before.
This was largely attributed to the $72.3 million impairment of goodwill. Auditor Deloitte said in the statements that the goodwill was allocated to its operational arm, and was based on future cash flow predictions from a five-year plan.
The local Burger King operator had accumulated losses of $93.8 million through to the end of 2018, leaving it with equity of $5.4 million.
While the group had a net working capital deficit of $19.2 million, up from a deficit of $8 million, the statements said its directors were satisfied it could be funded by operating cash flows and available borrowing facilities.
The company had refinanced its external debt since the start of the 2016 financial year, and its leverage now represented less than three times its earnings before interest, tax, depreciation and amortisation.
The company had $79.3 million debt in 2015, down from $149.2 million a year earlier. Net finance costs rose 2.6 percent to $19 million in the latest year.