Nathan’s Famous secures new $70 million credit facility By Investing.com

Nathan’s Famous, Inc. (NASDAQ:NATH), the well-known American fast-food company, has entered into a new credit agreement for a $70 million credit facility, according to a filing with the Securities and Exchange Commission (SEC) on Wednesday.

This financial maneuver includes a $60 million term loan and a $10 million revolving credit line with an option to increase by an additional $10 million, subject to lender approval.

The new credit facility, secured by Citibank, NA as administrative agent, matures on July 10, 2029. Nathan’s Famous used the term loan to refinance its existing 6.625% secured notes due 2025, which were due for redemption on the same date. The Company deposited funds with U.S. Bank Trust Company, National Association, securing redemption of the notes on August 14, 2024 at 100% of their principal amount.

The Refinancing released the Company and the Guarantors from their obligations under the 2017 Notes Indenture, including the collateralization of the Existing Notes, except for those obligations that continue under the terms of the Notes Indenture.

The credit agreement provides for the loan to be repaid in quarterly installments beginning September 30, 2024 and includes interest rate options tied to the base rate plus an applicable interest rate or the SOFR term plus an applicable interest rate. In addition, the Company will be charged an annual fee of 0.20% on the undrawn portion of the revolving credit facility.

Nathan’s Famous is also subject to financial covenants under the new agreement, which require it to maintain a consolidated fixed cost coverage ratio of no more than 1.20 to 1.00 and a consolidated net leverage ratio of no more than 3.00 to 1.00, effective as of the fiscal quarter ending September 29, 2024.

The terms of the credit facility restrict the company’s ability to incur additional debt, acquire liens, sell or acquire assets, make business changes, enter into related party transactions, make certain investments, and limit payments. The obligations under the credit agreement are unsecured, but a default could result in the lenders terminating their obligations and calling in the balance due.

This financial restructuring is a significant step for Nathan’s Famous, which operates in the food service retail sector under the SIC code 5812. The information is based on a press release.

InvestingPro Insights

Nathan’s Famous, Inc. (NASDAQ:NATH) has demonstrated a prudent approach to financial management, as evidenced by its recently executed credit agreement. In addition, data from InvestingPro suggests a stable financial outlook for the company.

With a moderate price-to-earnings (P/E) ratio of 14.61, slightly adjusted to 14.45 over the trailing twelve months to Q4 2024, investors could consider the stock fairly valued given its earnings. The company also boasts healthy revenue growth, up 5.98% over the trailing twelve months to Q4 2024, reflecting its ability to effectively grow its revenue streams.

InvestingPro Tips highlights several strengths of Nathan’s Famous. Notably, the company has kept its commitment to shareholders by making dividend payments for eight consecutive years, with a current dividend yield of 2.87%. In addition, Nathan’s Famous has a solid liquidity position, with cash exceeding current liabilities, and operates with moderate levels of debt, consistent with the company’s prudent financial strategy, as demonstrated by its recent refinancing exercise.

For investors who want a more in-depth analysis, InvestingPro offers additional tips for Nathan’s Famous that could provide further insight into the company’s financial health and investment potential. Interested readers can explore these tips and take advantage of a special offer using the coupon code PRONEWS24 to get up to 10% off a Pro annual subscription and a Pro+ annual or two-year subscription.

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