The short version
- El Vocero reported that Banco Popular offers to lend up to $1.5 million on an emergency basis to Encanto Restaurants
- Metro Puerto Rico reported that the proposed DIP financing is intended to give Encanto a short-term financial cushion to preserve assets and seek a buyer
- Metro Puerto Rico reported that the motion requests an initial $376,000 during the first two weeks to cover payroll, occupancy costs and essential expenses
- Metro Puerto Rico reported that Encanto filed for Chapter 11 on Nov. 5 after Yum! Brands affiliates terminated the KFC and Taco Bell franchises
Proposed emergency financing
Banco Popular is offering to provide up to $1.5 million in emergency financing to Encanto Restaurants Inc., the operator that filed for bankruptcy protection in Puerto Rico. El Vocero reported the bank is offering the loan to help the company preserve its assets while it searches for a buyer. Metro Puerto Rico reported that the financing would be structured as debtor-in-possession (DIP) funding under Chapter 11.
The motion filed on Nov. 10 before the U.S. Bankruptcy Court for the District of Puerto Rico asks for an initial $376,000 to be made available during the first two weeks of the case. According to Metro Puerto Rico, the funds would cover payroll, occupancy costs, essential services and other bankruptcy-related expenses. A hearing to approve the interim financing is requested for Nov. 13.
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Company's financial situation
Encanto Restaurants entered Chapter 11 with only $44,000 in cash and no operational income after it closed all of its restaurants. Metro Puerto Rico reported that the company had operated 169 locations under the KFC, Taco Bell and Pizza Hut brands. Affiliates of Yum! Brands terminated the KFC and Taco Bell franchise agreements on Nov. 1, leading to closures that began the following day and were completed by Nov. 5 when the bankruptcy petition was filed.
The company had faced increasing liquidity problems and unpaid obligations to landlords and other creditors. Metro Puerto Rico reported that Banco Popular, to which Encanto owes $87.7 million, had previously granted payment forbearance, reduced interest rates temporarily, signed a forbearance agreement and provided a $544,000 protective advance in late October to pay overdue rent at 12 locations and avoid evictions.
Where the sources differ
Both El Vocero and Metro Puerto Rico report that Banco Popular is offering up to $1.5 million in emergency financing to Encanto Restaurants to help preserve assets and seek a buyer. Metro Puerto Rico provides additional details on the proposed structure as DIP financing, the initial $376,000 tranche, the company's cash position of $44,000, the number of restaurants, the exact timeline of franchise termination on Nov. 1 and closures by Nov. 5, prior accommodations by the bank including a $544,000 advance, the interest rate of 12 percent, and the requested court hearing dates. El Vocero's available content focuses on the overall offer without those specifics.
What the reports do not say
The sources do not state whether the bankruptcy court has approved or will approve the proposed financing. They do not indicate if any buyer has been identified, the potential value of Encanto's remaining assets such as leases, or the outcome of any legal claims against Yum! Brands affiliates. The reports also do not specify the total number of employees affected or the company's full list of creditors beyond Banco Popular.
Sources
Every link below was opened and checked when this story was published. Official means a government body, agency or the organization itself; Reporting means a news outlet.
- Reporting Banco Popular ofrece prestarle hasta $1.5 millones de emergencia a Encanto Restaurants
- Reporting Banco Popular ofrece financiamiento de emergencia a Encanto Restaurants para buscar comprador
How we checked this
El Vocero and Metro Puerto Rico both covered Banco Popular's offer of up to $1.5 million to Encanto Restaurants. Most details on the company's financial condition, the bankruptcy timeline, prior bank accommodations and the exact financing structure rest on the Metro Puerto Rico report.
Compiled by the PuertoRico.com News Desk from the reports and statements listed above, and checked against them before publishing. It does not include original interviews. Spot an error? Email support@puertorico.com with a link to this story.
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