The once booming Darden Restaurants Inc had gone belly up and now the creditors of the bankrupt company are at odds as to the decision over the real estate. In a report from Bloomberg.com, a majority of the bondholders are refusing plans to split off properties of the defunct company in exchange for cash.
According to two people familiar with the transaction, lenders have declined a plan to transfer about 430 properties of Darden Restaurants into a real estate investment trust. The sources, who sought anonymity as the discussions were still private in nature, said that the main proponent of the refusal is the owner of Olive Garden and LongHorn Steakhouse chains in accordance to the plan of hedge fund Starboard Value when the latter took control of the board.
Darden for its part, offered its investors nearly $450 million of its credit bonds with a 0.5 percent consent fee to obtain waivers to allow the company to create the real estate investment trust. The reason for the move, according to a statement by the board last July 6, is to seek 'flexibility to execute sale-and-leaseback transactions that are part of its real estate strategy.'
The main oppositors to the plan include Voya Financial Inc, American International Group Inc and Reef Road Capital LLC, according to a recent report from wsj.com. Should the real estate be sold without their consent, the bondholders threaten to call the bonds in default, resulting in a freeze of all transactions and bankruptcy proceedings to ensue.
According to Darden's Company Treasurer Bill White, "We should make it clear that consent is not a requirement to do what we want to do, but it's certainly the preferred route."
For its part, the company has informed the protesting bondholders that the company has a legal avenue to pursue the deal without need of their approval. The plan though has been kept under wraps and despite several requests for an outline, the company has remained mum on the plan.