The Cheesecake Factory Provides Recapitalization Update

The Cheesecake Factory Incorporated (NASDAQ: CAKE) today provided a recapitalization update following the completion of its recent offerings of $345 million of 0.375% convertible senior notes due 2026 and $175 million of shares of the Company’s common stock. As previously disclosed, the Company used the net proceeds from the offerings to fund approximately $457.4 million payable in connection with the repurchase of 150,000 shares of its previously outstanding Series A convertible preferred stock and the conversion of the remaining 50,000 shares of Series A convertible preferred stock into approximately 2.4 million shares of the Company’s common stock, which simplified the Company’s capital structure.

In addition, using cash on hand and approximately $44 million in excess proceeds from the exercise of the underwriters’ over-allotment option in connection with the convertible notes offering, the Company repaid $150 million of its revolving credit facility, bringing the balance under the facility to $130 million. In connection with the debt repayment, the Company also terminated its interest rate swap agreement. As of June 25, 2021, the Company’s cash balance was approximately $144 million. The Company currently plans to maintain approximately $125 million in cash on its balance sheet and will evaluate additional potential debt repayment as part of its broader capital allocation strategy.

For the balance of the covenant relief period under its revolving credit agreement, borrowings will bear interest at LIBOR plus 250 basis points and thereafter the interest rate on the facility will revert to LIBOR plus a leverage-based margin ranging from 100 to 175 basis points. The $345 million in convertible senior notes will accrue interest at a rate of 0.375% per annum, payable semi-annually in arrears on June 15 and December 15 each year, beginning on December 15, 2021. Including the amortization of the issuance costs associated with the convertible senior notes, the effective expense in the interest line item on the income statement related to the notes is expected to be approximately 1% annually.

With regard to the common stock offering, the underwriters elected not to exercise their over-allotment option in keeping with the Company’s strategy to minimize the dilution associated with the offering. As a result of the issuance of 3.125 million shares in connection with the offering and the conversion of the remaining 50,000 shares of the previously outstanding Series A convertible preferred stock into approximately 2.4 million shares of the Company’s common stock, shares outstanding increased by approximately 5.5 million shares compared to 9.6 million shares underlying the former Series A convertible preferred stock. In total, weighted average diluted shares outstanding following these transactions are expected to be approximately 51.5 million.