Tilman Fertitta Offers Record 15% Loan Rate For Other Businesses
Owner of the Houston Rockets Tilman Fertitta, which also owns the Landry’s restaurant group and the Golden Nugget casino chain, is reportedly offering potential lenders an interest rate of at least 15% to participate in a new $ 250 million loan for its non-Rockets businesses.
The restaurants and casinos of Fertitta have been largely closed since early March due to the coronavirus pandemic (COVID-19), which has also interrupted the 2019-20 NBA season for now.
Regarding the loan plan to help consolidate his other businesses, Bloombergby Davide Scigliuzzo and Jeannine Amodeo write:
The businessman offers potential lenders an interest rate of at least 15% to participate in a new $ 250 million ready for its Golden Nugget casinos and hundreds of Landry’s Inc.-sponsored restaurants that have been ravaged by the coronavirus, according to people with knowledge of the matter.
The loan, which matures in October 2023 and is arranged by Jefferies Financial Group Inc., is one of the many levers that Fertitta uses to consolidate liquidity.
The company has already drawn $ 300 million all existing credit lines and Fertitta injects $ 50 million of his own money in the business, said one of the people, who asked not to be named because the details are confidential.
In the comments last month, Fertitta said he has had to reduce hourly staff hours and lay off about 40,000 employees in response to the economic fallout from COVID-19 closures.
Fertitta, who says he now feeds his 2,000 Houston employees for free at one of his closed restaurants, predicted his businesses could survive the pandemic at current rates until the end of 2020.
In Monday’s storyBloomberg quoted a source as saying that Fertitta views the new loan program “as an expensive insurance policy in case none of these companies can reopen before the end of the year.”
Based on initial discussions with investors, the loan is offered with a spread of 14 percentage points from the benchmark interbank offered rate in London and with a discount of around 96 cents on the dollar, the sources said. This puts the all-in return above 15%. The spread is the largest ever in the U.S. non-bankrupt leveraged loan market, according to data compiled by Bloomberg.
As for the Rockets, they should currently have the NBA Payroll No. 6 for the 2020-21 season to more than $ 130 million in total salary. While Fertitta has not warned of any financial consequences for the basketball franchise due to the pandemic, it is a scenario to watch if his businesses are not allowed to reopen in the coming weeks.
While all NBA owners will at least feel some financial impact from the pandemic, Fertitta could be disproportionately affected given the nature of its business (entertainment, dining and hospitality).