Wednesday, April 22, 2015

Luxor Pushes Panera into a Leverage Buyback

Luxor Capital, run by Christian Leone, rarely files a 13D, but often takes very large positions.  They own several restaurants, including BJ's (BJRI), which they have had in depth conversations with management and the stock is up some 50%.

What is odd about their campaign with Panera Bread Co (PNRA) is a tool very few activists have used in some time, a la 2007, which is raising debt to buy back shares.  Panera announced they will be authorizing $500 million of new debt, in which they will use to buy back $500 million worth of shares over the next 12 months.  The impact of ZIRP has been up for discussion for a while, but this quote from PNRA CEO pretty much sums it up:
  "The Company expects to purchase $500 million of shares within the next twelve months, through      a combination of cash on hand, cash flow from operations, and $500 million of new debt, taking          advantage of the attractive current interest rate environment." [emphasis added]

Here is a link to Press Release.