Meritage Completes New $302 Million Credit Facility; Positioning for Long-Term Growth

Rhea-AI Summary

Meritage Hospitality Group (OTCQX: MHGU) announced a new $302.8 million senior secured credit facility led by City National Bank, effective August 5, 2021. This replaces their prior credit facility due in February 2022. The new structure includes term debt of $181.8 million, a development line of credit of $86.0 million, and a revolving line of credit of $35.0 million. The facility offers improved cash flow benefits and supports the goal of expanding to 600 restaurants by 2026. The first half of 2021 saw strong sales and earnings growth, with a 100% increase in dividends to $0.16 per share.

Positive

• New $302.8 million credit facility enhances cash flow.
• 100% increase in dividends to $0.16 per share.
• Strong sales and earnings growth in the first half of 2021.
• Support for expansion to 600 restaurants by 2026.

Negative

• None.

GRAND RAPIDS, Mich., Aug. 06, 2021 (GLOBE NEWSWIRE) -- Meritage Hospitality Group Inc. (OTCQX: MHGU), the nation’s premier franchise operator, today announced that the Company and certain of its subsidiaries have in advisory with Auspex Capital, closed on a new $302.8 million senior secured credit facility syndication led by City National Bank.

The new senior credit facility, entered into effective as of August 5, 2021, replaces the Company’s previously existing credit facility due to mature in February 2022. The new $302.8 million credit facility includes term debt of $181.8 million, a development line of credit of $86.0 million and a revolving line of credit of $35.0 million. As required by the new credit agreement, which matures in 2027, the Company entered into a SWAP for a minimum of 50% of its current term debt outstanding. Specifically, the Company is closed on a SWAP in the amount of $120 million at a rate of 0.998% with the same term as the new facility. The new credit facility provides significant cash flow benefits to the Company including, but not limited to, a decrease in base pricing of 40 basis points, increased amortization to 12 years and a decrease in the effective SWAP rate of approximately 1.25%.

The Company continues to invest in significant enhancements to its operating platforms in preparation for continued growth led by renovations, new restaurant development and acquisitions. The expanded credit facility, along with improved terms and conditions, support management’s ability to meet its five year plan of 600 restaurants by 2026, which includes 400 Wendy’s, in-house brands and other QSR brands.

In the first half of 2021, Meritage reported strong sales and earnings growth, driven by renovations and new restaurant development. In addition the Company increased its common stock dividends by 100% to $0.16 per share compared to $0.08 in the prior year.

2021 Full-Year Financial Targets:   

• Sales growth of +10% to 15%
• Earnings from Operations growth of +20% to 30%
• Net Earnings growth of +20% to 30%
• EBITDA growth of +15% to 20%
• Dividend growth +100% to 125%
  

Meritage continues to distinguish itself as a national leader and innovator in the quick service and new restaurant segments, striving for best-in-class results through a performance-based culture committed to operational excellence, strategic acquisitions and real estate development.

About the Company

Meritage Hospitality Group is the nation’s premier franchise operator, with 344 restaurants in operation located in Arkansas, Connecticut, Florida, Georgia, Indiana, Massachusetts, Michigan, Missouri, Mississippi, North Carolina, South Carolina, Ohio, Oklahoma, Tennessee, Texas and Virginia. Meritage is headquartered in Grand Rapids, Michigan, operating with a workforce of approximately 11,000 employees. The Company has approximately 9.6 million diluted weighted average common shares outstanding. The Company’s public filings can be viewed at www.otcmarkets.com, under the stock symbol MHGU, or the Company’s website www.meritagehospitality.com.

SAFE HARBOR STATEMENT
Certain information in this news release, particularly information regarding future economic performance and finances, and plans, expectations and objectives of management, constitutes forward-looking statements. Factors set forth in our Safe Harbor Statement, in addition to other possible factors not listed, could affect the Company’s actual results and cause such results to differ materially from those expressed in forward-looking statements. Please review the Company’s Safe Harbor Statement at http://www.meritagehospitality.com.

CONTACT: Robert E. Schermer, Jr., CEO
Meritage Hospitality Group, Inc.        
616-776-2600

FAQ

What is the new credit facility amount for Meritage Hospitality Group (MHGU)?

The new credit facility amount is $302.8 million.

When did Meritage Hospitality Group close the new credit facility?

The new credit facility was closed on August 5, 2021.

What are the main components of Meritage's new credit facility?

The facility includes term debt of $181.8 million, a development line of credit of $86.0 million, and a revolving line of credit of $35.0 million.

What dividend increase did Meritage Hospitality Group announce?

Meritage announced a 100% increase in dividends to $0.16 per share.

What are Meritage's financial growth targets for 2021?

Meritage targets sales growth of 10% to 15%, and earnings growth of 20% to 30%.