Barfly Ventures Hires Rock Creek Advisors Amid Restaurant Reckoning

Barfly Ventures is working with Rock Creek Advisors as financial advisor as a downturn rages on in the restaurant industry, according to two sources familiar with the situation. The Michigan-based eatery and bar chain has also tapped Mastodon Ventures as investment banker, the sources added.

Barfly was struggling with under-performing new locations and bad lease agreements even before the coronavirus (COVID-19) pandemic severely impacted its business, one of the sources said.

Amid the issuer’s struggles, business development company Main Street Capital placed Barfly on non-accrual status in its 1Q20 earnings report, marking its USD 11.3m position at 10, compared to a 69 marking the prior quarter, according to SEC filings. Main Street’s investment is split between a USD 10.1m 12% secured debt tranche maturing 31 August 2020 and USD 110,000 in 9% PIK secured debt due 23 March 2021, in addition to three options and two warrants.

The company received a USD 25m equity and cash-flow debt investment from Congruent Investment Partners and Main Street in 2015. News outlet MLive reported in September 2015 that the deal was earmarked to help finance the opening of 30 new locations for the Grand Rapids-based chain. Barfly has since opened eleven new locations of HopCat, its original beer and restaurant concept, across the Midwest and in Florida.

Barfly permanently closed a Royal Oak, Michigan location of HopCat after failed landlord negotiations, Eater Detroit reported on 27 May. Barfly also operates burger joint Stella’s Lounge and pub Grand Rapids Brewing, both in Grand Rapids.

The novel coronavirus has hit restaurants particularly hard, with stay-at-home orders and fears of the virus keeping people at home. April 2020 sales from food service and drinking place establishments fell by 48.7% from the year prior, according to US Census estimates.

Rock Creek declined to comment. Barfly, Mastodon Ventures and Congruent did not respond to requests for comment. 

by Catherine Perloff and Giovanna Bellotti Azevedo