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Steak 'n Shake Preparing for Financial Restructuring

According to reports, Steak 'n Shake Inc. Is preparing for a potential financial restructuring. The Company has hired FTI Consulting Inc. to advise on us strategic options, which may include an out-of-court restructuring or a bankruptcy filing. Steak ‘n Shake has been struggling with negative comparable restaurant sales for years, and the pandemic exacerbated it’s woes. Year-to-date sales through 3Q20 were down 43.1%, largely based on a 44.6% drop in customer traffic. Given the increase in COVID-19 cases across much of the country and the re-imposition of indoor dining bans in several states, those trends likely worsened in 4Q. The Company and franchisees permanently closed 92 net restaurants through 3Q20 (82 Steak 'n Shake and 10 Western Sizzlin), ending the period with 260 Company-owned and 268 franchised Steak 'n Shake locations and three Company-owned and 39 franchised Western Sizzlin locations, or 570 in total. The Company's most pressing concern Is a $153.1 million secured term loan that matures on March 19, 2021. Steak ‘n Shake’s parent Company, Biglari Holdings, has stated that it Is not and does not plan to become a guarantor for the loan. As a result, we have downgraded Steak ‘n Shake's rating to F2, our lowest rating.

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