One restaurant analyst had a mixed reaction to Tuesday's news that casual-dining chain Granite City Food & Brewery Ltd. reached a $15 million debt-for-equity swap agreement with DHW Leasing LLC. (The Deal Pipeline subscribers can read the full story
here.)
Deal terms call for DHW to acquire 28 million shares of common stock at 54 cents per share taking a 64% stake in the company.
Granite City management was grateful it finally got rid of most of its debt, but Feltl and Co. analyst Mark E. Smith can't figure out what DHW was thinking.
"We are surprised by this component and unsure why DHW would sign an agreement limiting the upside potential of this transaction," Smith wrote in a Tuesday research note.
Not only that, Smith still thinks Granite City has other issues.
"Considering the company has trailing 12 month Ebitda of approximately $2.3 million and $1.9 million in cash, we think it is highly unlikely the company will able to meet its contractual obligations over the next 18 months," Smith added. He has a sell rating on Granite City.
Either way, the deal still must be good news for Granite City. -
Demitri Diakantonis
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