Quite a bit of interest in Apollo-Qdoba deal
Apollo Management Chief Executive Leon Black has a taste for junk food — and his employee Lance Milken appears to have a taste for junk bonds.
The private equity powerhouse — whose billionaire boss has gorged himself in the past on buyouts of chains like Chuck E. Cheese and Carl’s Jr. — agreed on Tuesday to shell out $305 million to buy the Qdoba Mexican Eats chain from Jack in the Box.
The deal was led by Apollo’s Lance Milken — the 42-year-old son of Michael Milken, who gained notoriety as Drexel Burnham Lambert’s “junk-bond king” in the ’80s.
Terms weren’t disclosed, but sources said Deutsche Bank financed the deal with bonds that could carry interest rates as high as 12 percent.
The bonds won’t price until next month, but the sky-high rates are likely to land them in junk territory, sources said.
“We are firmly committed to Qdoba’s continued growth as a leading fast-casual restaurant operator,” Milken said in a press release.
Several other banks were shown the deal and turned it down, deciding it was too risky to fund, sources said.
“That is a pretty high rate,” John Gordon of Pacific Management Consulting Group said.
Private equity firms when buying companies put down a relatively small amount of equity, and have the company borrow debt to finance the deal.
Qdoba has been struggling. In November, it said same-stores sales fell 2.1 percent in the most recent quarter, and 1.5 percent in the most recent fiscal year.
The Post reported exclusively Nov. 2 that Apollo was eyeing the chain, and then on Dec. 7 that Apollo was close to a deal.