The Chefs' Warehouse

Company overview

The Chefs' Warehouse (NASDAQ: CHEF) distributes specialty and center-of-the-plate foods to independent restaurants, fine dining, hotels, clubs and caterers. >90,000 SKUs; >55,000 customer locations across 23 markets; 44 DCs. Top-10 customers ≈ 6% of FY2025 sales; New York ~16%. LTM Jun-26: net sales $4.39bn, Adj. EBITDA $293.5m (~6.7% margin), ~$780m of cash operating costs. No financial sponsor; founders/management own ~12–13%.

Read the cycle, not only the trailing twelve months. LTM is a record (2.50x gross / 2.04x net; ~7.3x historical coverage; ~$321m liquidity). In FY2020 the same business printed negative Adj. EBITDA (−$42.9m) when restaurant customers shut — sales −30% while cash opex barely flexed. See the model's 2020 Precedent tab.

Capital structure today: TLB $245.5m (SOFR+250), ABL $300m ($70m drawn), $287.5m 2.375% converts due Dec-2028, finance leases/other ~$130m.

Ask (illustrative): $500m senior secured first-lien unitranche at SOFR+450 (0.50% floor, 98.5 OID) to refinance the TLB and fund a hypothetical $250m specialty/center-of-the-plate distributor tuck-in (~$28m Adj. EBITDA). ABL keeps first priority on AR/inventory (split-lien). Converts stay. PF Adj. EBITDA $321.5m; ~3.07x gross / ~2.68x net; ~5.2x PF coverage vs ~7.3x LTM historical; PF liquidity ~$313m. The IC question: how much downturn before EBITDA is gone, and what do WC, the ABL borrowing base, and the 2028 converts do to the lender?

Downside snapshot (from §7): 12-month stress on PF Adj. EBITDA $321.5m. Downside: sales −10%, GM −50 bp; Adj. EBITDA $203.7m; ending liquidity $335.2m; 4.09x net vs 4.50x covenant (9% cushion); PF stressed coverage 3.1x; unitranche recovery 100% going concern / 97% liquidation. Severe: −20%, −100 bp; $95.5m; $265.0m; 9.46x, breach; PF 1.4x; 61%/92%. Tail ("2020 replay"): −30%, −200 bp; ($23.2m); $228.1m; breach; PF (0.4x); 0%/78%. 2020 actuals: sales −30%, Adj. EBITDA $89.0m to −$42.9m.

Your memo should answer

1. 01Trailing numbers are a record ($293m EBITDA, ~2.0x net), but 2020 Adj. EBITDA was −$43m on a 30% sales decline. What is the operating leverage? At what sales decline does a 4.50x covenant trip, and when is EBITDA zero? How much recent growth was food inflation on a fixed cost base, and what does deflation do to GP dollars and inventory?
2. 02Trade WC is ~$530m (~1.8x EBITDA). When does WC release cash vs eat cash? Walk 2020–2021 and the Downside case where WC is a use. What does a 5-day cut in supplier terms cost, and what is the ABL borrowing base doing at the same time?
3. 0355,000 customers, top-10 only ~6% — but independents on 14–60 day terms with 'very low' switching costs. What do filings say about churn, retention, and AR aging — and what don't they? In 2020 the allowance hit ~20% of receivables. How do you underwrite receivables quality?
4. 04The ABL springing FCCR only bites below ~$30m availability; the TLB being refinanced has no maintenance test described. What tripwires does *this* unitranche give you, and when do they trip vs liquidity running out? Is 4.50x net leverage the right primary test, or is liquidity?
5. 05You're second on AR/inventory behind a $300m ABL, and PACA may prime produce. What does the unitranche own? Going-concern vs liquidation recovery in Tail, break-even multiple, and why ABL cap / reserve-notice / purchase option matter here.
6. 06Converts are $287.5m par / ~$641m fair value at ~$90 stock. In a loss scenario the stock isn't $90 — walk Dec-2028 liquidity vs convert principal in Severe/Tail, springing maturities, and who gets paid first. Why does SOFR+450 pay vs the company's SOFR+250 TLB, and what would you change?

Financials ($M)

Term sheet

Facility (the ask)

$500m senior secured first-lien unitranche TL — ILLUSTRATIVE private club

Use of proceeds

Refinance $245.5m existing TLB (SOFR+250) + fund hypothetical $250m specialty distributor acquisition (~$28m Adj. EBITDA)

Priority / liens

Split-lien: ABL first on AR/inventory; unitranche first on PP&E, IP, equity. PACA trust rights may prime produce inventory

Tenor / springing maturity

6 years; springs Sep-15-2028 (91 days before converts) unless ≤$50m converts remain or liquidity ≥ converts + $125m

Pricing (illustrative)

Term SOFR + 450 bp, 0.50% floor, 98.5 OID (−25 bp at ≤2.25x total net leverage); ~200 bp over existing TLB

Pro forma leverage

PF Adj. EBITDA $321.5m; ~3.07x gross / ~2.68x net (incl. converts); ~2.18x secured; PF liquidity ~$313m

Coverage note

~7.3x = LTM historical (Adj. EBITDA / reported interest). ~5.2x = PF at illustrative structure. Do not mix.

Financial covenants

Max total net leverage 4.50x → 4.25x after Q8; minimum liquidity $125m (cash + ABL availability) tested monthly

ABL covenant (existing)

Springing min FCCR 1.0x only if availability < $21m or 10% of Line Cap (~$30m). Existing TLB: no maintenance test described in filings

Other terms

ABL cap $325m incl. accordion; ABL reserve-notice / purchase-option rights; add-backs capped 10%; converts $287.5m stay outstanding