If Dave & Buster's Entertainment (NASDAQ:PLAY) is unable to get its lenders to agree to new terms on its debt, then the entertainment-themed restaurant chain says it will seek bankruptcy protection from its creditors.

Unlike many other restaurant chains, which survived the worst of the COVID-19 pandemic by relying on takeout and delivery, Dave & Buster's, which thrives on the in-restaurant experience, had no equivalent fallback position.

Dave & Busters adult arcade

Image source: Dave & Buster's Entertainment.

Old news, new imperative

The Wall Street Journal reported Dave & Buster's has received waivers on some of its loans through Nov. 1, but when filing its quarterly earnings report last week, the restaurateur warned if it could not garner additional concessions it might have to file for bankruptcy. It said there was substantial doubt about its ability to continue operating as a going concern.

Dave & Buster's noted it had furloughed almost its entire workforce in March, borrowed substantially all the remaining availability under its revolving credit facility, and had to sell stock to increase liquidity, raising over $182 million in net proceeds from the sale.

Although its quarterly earnings news release discussed "encouraging business recovery trends," it apparently is not enough to overcome the $732 million in long-term debt on its balance sheet that's offset by less than $225 million in cash and equivalents.

Revenue fell 85% year over year and comparable sales were down 87%. It has so far reopened over 90 of its 130 restaurants, with social distancing protocols in place.

Dave & Buster's stock was tumbling 23% in midday trading on the report, although the restaurant announced the news a week ago.

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