Burger King to Pursue $750 Million Sale Leaseback?

Sep 3, 2003 - Yahoo - The Daily Deal by Josh Kosman

In December 2002, Diageo plc sold its troubled Burger King franchise to a consortium of buyout firms led by Texas Pacific Group for the discounted price of $1.4 billion to focus on its core liquor brands, including Johnnie Walker, Guinness and Smirnoff. Diageo agreed to guarantee a loan the acquirer issued to support the buyout. Now Burger King's sales have fallen and Diageo is on the line with a $1 billion loan guarantee package to the chain. Though no one expects Burger King to default on its loans anytime soon, its U.S. stores are struggling, and the loans are losing value. Burger King's sales in the U.S. have fallen about 4% almost every month in 2003 compared with year-earlier period, and several of the company's largest franchisees are troubled. Asset sales could be in the offing.

Most franchisees (7,000 of the 8,000 locations) own the land on which their stores sit, which makes it easy for them to open other fast-food outlets. Burger King also owns the land on its own store locations, and it could sell the real estate for more than $750 million in a leaseback agreement. Burger King currently has about $225 million of cash on its balance sheet, the source close to its owners said. Sphere: Related Content