Wendy’s Bondholders Try To Foil Spin-off

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The New York Sun

Several large bondholders are hoping to convince a New York Supreme Court judge today to halt a multibillion-dollar spin-off of the Tim Hortons restaurant chain by Wendy’s International set to take effect at the end of the week.

The plaintiffs, led by the American Family Life Assurance Company — popularly known as AFLAC — and other institutional investors, wrote in court papers filed yesterday that the Wendy’s plan to spin off its baked goods and coffee chain fundamentally violates the terms of their bond agreements.

The spin-off, they claim, would irreparably harm both the value of the bonds they hold and the company’s credit rating.

“We’re hoping to get the court’s attention tomorrow,” an attorney for the plaintiffs, Glenn Kurtz of White & Case, said yesterday evening.

Mr. Kurtz called the Hortons chain, which has more than 2,800 restaurants and is popular in parts of upstate New York, Michigan, Ohio, and Canada, “extremely profitable.”

Indeed, in the quarter ending July 2, 2006, the Hortons chain posted $93.5 million in operating income for the company, a 21% year-over-year increase.The recent strength of the Canadian dollar has helped the Hortons chain because a majority of Hortons restaurants are in Canada. By comparison, the Wendy’s fast food subsidiary posted an operating income of $51.2 million during the same quarter, a 10.8% year-over-year slide.

Wendy’s International announced last week that it intended to complete the distribution of the remaining 83% of Tim Hortons shares to investors.It began the process of shedding Tim Hortons in March when it raised $672 million by selling 29 million Tim Hortons shares.

Just days from now, Wendy’s shareholders are set to receive about 1.35 shares of Tim Hortons for each Wendy’s share they own.

AFLAC, of Columbus, Ohio, argues in court papers that the bond-rating of Wendy’s will fall further unless the judge stops the planned spin-off of 160 million shares from going through.

Representatives of the Dublin, Ohiobased hamburger chain, which has owned Tim Hortons since the mid-1990s, didn’t immediately return phone calls seeking comment last night.

Wendy’s International closed yesterday at $64.26, up $0.68.

The other plaintiffs include Massachusetts Mutual Life Insurance Company, Millennium Partners LP, and Swiss Re Financial Products Corp.

The New York Sun

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