Bondholders of Darden Restaurants Inc. are resisting the company’s push to split off its real estate, rejecting two offers to bless the transaction in exchange for cash, according to two people with knowledge of the matter.
A majority of the lenders have declined to provide consent to a plan that would transfer about 430 properties into a real estate investment trust, the people said, asking not to be identified as the information isn’t public. The owner of the Olive Garden and LongHorn Steakhouse chains is following through on a strategy outlined by Starboard Value, the hedge fund that took control of its board after a proxy fight last year.
Darden offered investors holding about $450 million of its bonds last month a 0.5 percent consent fee to change covenants linked to its proposed real estate transaction. It said in a July 6 statement that it’s seeking “the flexibility” to execute sale-and-leaseback transactions “as part of its recently announced real estate strategy.”
The Orlando-based company doubled the offer this month, and a July 9 deadline for bondholders to accept it passed with a majority still rejecting it, the people said.
The Wall Street Journal reported earlier that a group of bondholders were resisting the plan and had engaged the Stroock & Stroock & Lavan LLP law firm to better represent their interests. The firm didn’t respond to a request for comment.
Bondholders are demanding more information about the value of the REIT transaction and haven’t received it, according to one of the people.
“As we have previously stated, bondholder consent is not a condition to the real estate strategy we are pursuing,” Rich Jeffers, a spokesman for Darden, said in an e-mailed statement. Bill White, the Darden treasurer, said on a June 23 conference call that obtaining the consents was “the preferred route” though “not a requirement.”
The REIT, which would be publicly traded, would lease back the properties to Darden, according to a June 23 statement. Starboard Value, run by Jeffrey Smith, had been pushing the idea of better exploiting the company’s real estate.