A major United States franchise company is expected to file for bankruptcy after missing interest payments on its loans, which were due earlier in the year. The company, NPC International, is known for operating a number of fast-food restaurants including Pizza Hut and Wendy’s.
According to The Wall Street Journal, the company owns more than 1,200 Pizza Hut restaurants and 385 Wendy’s restaurants. They are reportedly planning to file for chapter 11 protection.
The move comes in spite of the fact that NPC International reportedly benefitted from the surge of stay-at-home orders during the coronavirus pandemic, which left many people unable to go to restaurants forcing them to rely on delivery or takeout food options.
In fact, Pizza Hut’s parent company, Yum Brands, said that the restaurant had its highest average delivery and takeout sales in the past eight years. In addition, same-store sales — the growth from all restaurants that have been operating for at least a year — were “up in the low teens” throughout the end of April through May.
However, the financial windfall offered by the pandemic was not enough to help the company, which had missed paying its loan interest payments that were due on January 31. The interest stemmed from a loan worth an estimated $800 million. NPC International’s failure to pay spurred S&P Global Ratings and Moody’s Investors Service to downgrade the company’s debt standing.
“The downgrade reflects NPC’s decision not to pay interest due to 1st lien and 2nd lien term loan lenders on January 31, 2019 as well as its intention not to make future debt service payments on these debt instruments,” stated Bill Fahy, Moody’s Senior Credit Officer in a February release.
“Moody’s views the non-payment of interest and principal as an event of default regardless of the existence of a forbearance agreement since required payments as well as future payments will not be made within the contractual terms of the respective credit agreements,” the statement added.
The Wall StreetJournal added that sources familiar with the matter said that even back in January, NPC International was having “conversations” with its lenders about a possible bankruptcy.
Analysts have blamed the debt on the company’s decision to remodel several restaurants in an effort to modernize their brands.
The company — which employs around 37,000 people — has not made any public statement on the matter.
NPC International is far from the first company to have filed for debt restructuring during the coronavirus pandemic. A number of retailers, including J. Crew, Pier 1, and Neiman Marcus, have also taken the measure.
In addition, Cirque du Soleil announced their decision to file for bankruptcy just yesterday, as was previously reported by The Inquisitr.