P.F. Chang’s Bistro Is Exploring a Sale

(Bloomberg) -- Chinese restaurant chain P.F. Chang’s Bistro, burdened with a heavy debt load and fierce industry competition, may be headed to the auction block, private equity owner Centerbridge Partners LP said.

Centerbridge bought the brand and took it private in 2012. The firm recently completed P.F. Chang’s split from Pei Wei Asian Diner, a separate restaurant chain that had been operated by the parent company.

The 2012 deal valued the chain at $1.1 billion, Bloomberg reported at the time. But many companies in the industry have struggled in recent years amid a grocery price war that has driven down the price of food and fears that the U.S. market is saturated with restaurant locations. Intense competition has also prompted a slew of discounting that has weighed on the results of restaurant companies. Centerbridge didn’t say what kind of price it would seek for the chain.

“Given the positive performance of P.F. Chang’s Bistro and having received multiple unsolicited indications of interest, this is an exciting time to explore a sale,” Steve Silver, global co-head of private equity, said in a statement.

Debt Load

P.F. Chang’s operates 214 locations in the U.S. and franchises another 93 restaurants in 24 countries around the world. Centerbridge retained BofA Merrill Lynch and Barclays to explore the potential sale. The firm couldn’t immediately be reached for comment beyond the press release.

A buyer might help P.F. Chang’s cope with its debt burden of about $680 million. The chain’s performance has drawn skeptical reviews from credit raters such as Moody’s Investors Service, which said in an April downgrade that cash is eroding and P.F. Chang’s might have trouble refinancing bonds that come due in June 2020. If that effort fails, the company could face demands for immediate repayment of its bank loans, according to Moody’s, which cut the chain’s grade to Caa1 from B3.

The news pushed the company’s bonds higher, with senior unsecured bonds trading at about 90 cents on the dollar -- still reflecting doubts among investors about whether they’ll be fully repaid. S&P Global Ratings speculated in March that P.F. Chang’s might ask holders to swap their bonds for new debt at less than full value to ease the crunch, adding that they’d recover little or nothing if there’s a default.

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