Upcoming refinancing could lift FCF by 50%.
A franchise business with thousands of locations levered up heavily to survive Covid, and by 2024 the market was pricing it for bankruptcy. An emergency refinancing took the immediate risk off the table but left the company paying extremely expensive interest, with debt service eating up most of EBITDA. The stock trades at a mid-single-digit EBITDA multiple despite a franchise model that is finally generating and growing cash again.
The make-whole on that expensive debt expires soon, and management has openly flagged that a refinancing is the priority. Things have meaningfully improved for the company since the 2024 refinancing. Any new financing would likely get priced on much better terms. The board was just refreshed with a new CEO, chairman and a savvy activist who looks well suited to help the company navigate the upcoming deal. A successful refi at more normal rates could lift FCF by around 50%, with re-rating optionality on top.
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