After returning $20 million in loans from the Paycheck Protection Program (PPP), the parent of Ruth’s Chris Steak House has pursued other financing routes to keep $62.5 million in cash on hand and is currently in discussions with identified parties about additional funding.
The company, Ruth’s Hospitality Group, did not say what forms that additional financing might take. Those resources would apparently be in addition to the possible issue of another $75 million in stock. The company said it intended to register later Friday for a shelf offering.
The reference to negotiations with other parties comes as several competitors of Ruth’s Chris have boosted their liquidity by selling big chunks of equity to investors. This week, BJ’s Restaurants completed the sale of 3.5 million common shares of stock to Ron Shaich’s Act III investment fund and T. Rowe Price. The Cheesecake Factory recently raised $200 million by selling a stake to Roark Capital, the parent of Buffalo Wild Wings, Miller’s Ale House and a host of other restaurant brands.
Ruth’s revealed Friday that sales declines triggered by the COVID-19 crisis accelerated during April, with same-store sales for the current quarter running about 83.5% below the year-ago level for company-operated units.
Fifty-six of the company’s 86 corporate restaurants are currently open for takeout and delivery, said CEO Cheryl Henry. Franchisees have closed 31 units, leaving 28 branches open for off-premise business. About 14 restaurants have partially reopened their dining rooms.
Ruth’s ended the first quarter with $70.8 million in cash on hand, largely from drawing down what remained in a $120 million revolving credit facility. An “accordion” feature of the facility enabled the company to borrow another $30 million, and it has relaxed the financial covenants for the remainder of the year.
The company found itself in considerable controversy after news reports revealed it had obtained $20 million in two loans from the PPP, a federal program intended to help small businesses through the COVID-19 crisis. The outrage centered on a company of Ruth’s size getting loans that many saw as a last resort for struggling mom and pops. Amid the criticism and after the PPP rules had changed, Ruth’s gave the $20 million back.
The company projects that its cash burn rate for the second quarter will run about $2.4 million per week. If dining rooms are unable to open, Ruth’s said, the rate would likely fall below $2 million.