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Steak n Shake’s lender says the company still owes millions

The administrative agent for the burger chain’s debt says it is owed $8.5 million in unpaid fees and interest. Meanwhile, Steak n Shake has dismissed its lawsuit against its lender.
Photograph: Shutterstock

The administrative agent on Steak n Shake’s loans is taking issue with the company’s declaration that it is “debt-free.”

Specifically, Wilmington Trust, National Association has sued the Indianapolis-based fast-food chain over $8.5 million in unpaid fees and interest dating back to 2018—funds it says Steak n Shake refuses to pay.

The unpaid fees relate to $220 million in loans that Steak n Shake’s parent company, Biglari Holdings, supposedly paid off in February—helping the chain avoid a bankruptcy filing that had at one point seemed imminent.

The lawsuit, filed in a federal court in New York, promises to keep legal pressure on Steak n Shake and Biglari Holdings stemming from the acrimonious issue of the chain’s debt. It’s the third legal action connected with that debt—Steak n Shake last week dismissed its lawsuit against Fortress Investment Group, the private equity firm that bought the chain’s debt and sought to push the company into filing for bankruptcy.

Steak n Shake borrowed $220 million in 2014. Biglari Holdings, its parent company, did not back the debt. That debt became an increasing problem in recent years as the chain’s sales struggled, and the chain spent much of last year furiously working on an effort to avoid declaring bankruptcy. Biglari Holdings in February finally paid $102.5 million to pay off the amount due, thus avoiding a filing.

In a subsequent press release, Steak n Shake declared itself “debt-free,” which made it “one of the strongest companies in the restaurant industry.”

Wilmington took issue with that description. “Contrary to Steak n Shake’s position, Steak n Shake is not ‘debt-free’ and the credit facility with the lenders has not been ‘retired’ because there are millions of dollars in outstanding ‘obligations’ that Steak n Shake still owes to the lenders and Wilmington under the credit agreement,” the company said in a filing.

According to the lawsuit, Wilmington had the right to apply Steak n Shake’s payment first to its and the lenders’ costs and expenses. Thus, Wilmington says, Steak n Shake still owes money and its debt is not actually retired.

Wilmington in its lawsuit says Steak n Shake still owes nearly $3.7 million in damages—which could be characterized as debt the company owes on its credit facility or unpaid fees.

In addition, the firm says, Steak n Shake owes $4.85 million in interest that has been accruing since 2018. Wilmington says that Steak n Shake has thus far refused to pay any such fees. 

This is not the first lawsuit between Steak n Shake and Wilmington, which took over as the administrative agent on the company’s debt in May of last year. In August, Steak n Shake sued the company over Wilmington’s refusal to release liens on restaurants the company was trying to sell. A judge ruled in Wilmington’s favor the following month.

Steak n Shake had previously sued Fortress, which acquired the company’s debt on the secondary market and was using its rights as lender to take ownership of the chain. Fortress has been a particularly aggressive buyer of restaurants and other companies using such “loan-to-own” strategies.

Steak n Shake argued that Fortress initially expressed interest in acquiring some of the chain’s properties that were up for sale last year as a way to get information on the company—which it then used to buy up the debt in a bid to take the company over.

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