A group of bondholders are not happy with Darden’s plans to separate its real estate. According to sources close to the matter, Voya Financial Inc., American Insurance Group Inc., and Reef Road Capital LLC are against Starboard Value LP, the investment firm that won over the board last year. Bondholders say their bonds have restrictions on the company’s sale-leaseback activities, but Darden maintains it doesn’t need bondholders’ consent to move forward. Company treasurer Bill White reiterates that “consent (from the bondholders) is not a requirement to do what we want to do, but it’s certainly the preferred route.”
Darden is keeping their cards close to the chest on this play, declining to share the structure of their transaction with the creditor group despite multiple requests. Darden has tried to work with its bondholders however, offering $10 per $1,000 in notes they hold in exchange for support of the deal. Starboard revealed earlier in July that it has been pushing the same type of strategy for Macy’s Inc. The struggle Darden finds themselves in is giving the bondholders what they want, while also trying to resist activism, which is rarely good for creditors.
In October, Starboard led a campaign to remove the entire board of directors at Darden, and stated that the company’s real estate was worth billions to its shareholders. In September, Starboard detailed what it would do if it won a shareholder election, part of which was breaking up the company’s real estate. Starboard remains firm it will keep an investment grade rating on Darden, and when it released its real estate plan in June, credit rating firm Moody’s called it a “credit positive” move as Darden has plans to repurchase $1 billion in bonds with proceeds from the plan.