CrowdOut Capital makes a $32M bid for Punch Bowl Social

The lender, which has controlled the eatertainment chain since last year, was named the stalking horse bidder for the chain, but other potential buyers are lurking.
Photo courtesy of Punch Bowl Social

CrowdOut Capital, the lender that has controlled Punch Bowl Social for the past several months, has the inside track at buying the chain outright after its $32 million credit bid for the Denver-based chain was chosen as the “stalking horse” bid for the company.

As the stalking horse bidder, CrowdOut sets the floor for any potential price paid for the company—a potential buyer would have to offer to pay more than $32 million in an auction set for March 8. Bids are due on March 3, said Ted Gavin, a bankruptcy consultant serving as Punch Bowl’s chief restructuring officer.

A potential bidder could also conceivably work out a deal with CrowdOut, potentially sharing in equity or taking on the debt.

Yet Gavin noted that several potential buyers are interested in Punch Bowl, which is currently operating two of its 13 locations. It has closed five locations over the past year as the pandemic eroded dine-in service at a chain known mostly as an experiential destination.

“Several more came in today and they all know who the bidder is and when the bid deadline is,” Gavin said.

Punch Bowl filed for bankruptcy protection in December after a brutal year that saw the company fall from its perch as one of the hottest full-service concepts in the country. CrowdOut, to which Punch Bowl owed about $21 million, called its loan in March after states across the country closed dining rooms.

Cracker Barrel, its sponsor, opted not to increase its investment in the company and wrote off nearly $140 million, the value of its investment in Punch Bowl in 2019. CrowdOut took over operations of the chain in August, placing John Haywood as CEO.

Two board members of Punch Bowl’s holding company placed the chain into bankruptcy in December as CrowdOut was moving to take over ownership. The two sides ultimately settled their differences, and in addition to the $21 million in legacy debt the investment firm has also provided $11 million in additional financing to get the chain through the bankruptcy process.

A court hearing is set for next week to approve the bid.

While the stalking horse bid is the amount of secured debt on the company, the presence of a number of potential bidders for the chain increases the chance to a sale to a company other than CrowdOut. Numerous investors, sensing some opportunity in a post-pandemic resurgence of dine-in business, could theoretically eye a concept like Punch Bowl.

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