Updated: May 20, 2010 3:36 p.m.

Goldman Sachs buys into Del Taco

By NANCY LUNA
The Orange County Register

The parent company of Lake Forest-based Del Taco announced Thursday a major financial restructuring that involves the selling off of a key fast-food brand.

Nashville-based Sagittarius Brands, which bought Del Taco in 2006, is refinancing company debt and selling its Captain D's seafood chain to Sun Capital Partners. The latter is a private equity firm whose portfolio includes Boston Market, Souplantation parent Garden Fresh Restaurant Corp., Bruegger's and Fazoli's.

Under the restructuring, Del Taco will reduce its overall debt by about $250 million and operate under a new parent company called Del Taco Holdings. Goldman Sachs Mezzanine Partners in New York now owns a majority stake in Del Taco Holdings, which will remain headquartered in Lake Forest, CA.

The sale price of Captain D's was not disclosed.

A new credit line combined with "a significantly lower level of debt" allows Del Taco to improve cash flows and invest in the business, Chief Financial Officer Steven Brake said in a prepared statement.

That investment includes sprucing up older restaurants and creating innovative menu items to keep the chain competitive, officials said during a conference call late Wednesday.

The door is now open for Del Taco to become a "more aggressive brand" in a tough economy, Chief executive Paul Murphy said.

In 2009, Del Taco had system-wide sales of $568 million and currently operates 287 company-owned units with 231 franchised locations. Same-store sales, a key indicator of a restaurant's financial health, have been positive over the last 15 months.

When Sagittarius bought Del Taco for an undisclosed amount three years ago, the Mexican fast-food chain had 461 stores in 13 states. Annual sales were at $335 million.

Del Taco plans to add more company and franchise locations in key markets. Currently, Del Taco's strongest regions include Southern California, Phoenix, Las Vegas and Salt Lake City. The chain is expanding in Colorado, Michigan and recently opened its second location in Florida.

Contact the writer: nluna@ocregister.com or 714-796-6756. Checkout my fast food blog at ocregister.com/fastfood

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