Buffets defaults on loan, aims to refinance

Buffets Inc. missed sales targets in September, triggering a default on a $280 million bankruptcy loan that has been funding the Eagan company's restructuring effort, court documents say.

Papers filed in the U.S. Bankruptcy Court in Wilmington, Del., don't say how badly Buffets missed its September sales goals. Buffets operates the Old Country Buffet and Ryan's restaurant chains.

The company said that lenders led by Credit Suisse First Boston Corp. have agreed to forgive Buffets for missing its September sales target, as long as the bankrupt restaurant chain agrees to an interest-rate increase on part of its $280 million bankruptcy loan. Moreover, the lenders are asking for additional fees, including some the company doesn't want to disclose.

If the company fails to agree to the revised financing terms, the banks "would be permitted to exercise their remedies against [Buffets] assets to the significant detriment of all ... creditors," Buffets' court documents say.

About $200 million of the bankruptcy loan consists of bank debt the company brought with it when it filed for Chapter 11 in January. The 1 percent interest-rate boost incorporated in the forbearance agreement applies to the $80 million "new money" portion of the loan.

Buffets is due in court Tuesday to seek permission to sign a forbearance pact with banks and pay the extra money.