-----BEGIN PRIVACY-ENHANCED MESSAGE----- Proc-Type: 2001,MIC-CLEAR Originator-Name: webmaster@www.sec.gov Originator-Key-Asymmetric: MFgwCgYEVQgBAQICAf8DSgAwRwJAW2sNKK9AVtBzYZmr6aGjlWyK3XmZv3dTINen TWSM7vrzLADbmYQaionwg5sDW3P6oaM5D3tdezXMm7z1T+B+twIDAQAB MIC-Info: RSA-MD5,RSA, NaHSoKly4v5i3tT2V4tDk1tjXuZn/XT3ZrQQ/jEma7ra2fmdyKAnIkZEsr03xjnF 68TQq35yntfEPrA/vFSDxg== 0000932799-04-000039.txt : 20040223 0000932799-04-000039.hdr.sgml : 20040223 20040223160338 ACCESSION NUMBER: 0000932799-04-000039 CONFORMED SUBMISSION TYPE: SC 13D PUBLIC DOCUMENT COUNT: 3 FILED AS OF DATE: 20040223 SUBJECT COMPANY: COMPANY DATA: COMPANY CONFORMED NAME: DENNYS CORP CENTRAL INDEX KEY: 0000852772 STANDARD INDUSTRIAL CLASSIFICATION: RETAIL-EATING PLACES [5812] IRS NUMBER: 133487402 STATE OF INCORPORATION: DE FISCAL YEAR END: 1203 FILING VALUES: FORM TYPE: SC 13D SEC ACT: 1934 Act SEC FILE NUMBER: 005-40568 FILM NUMBER: 04622151 BUSINESS ADDRESS: STREET 1: 203 E MAIN ST CITY: SPARTANBURG STATE: SC ZIP: 29319 BUSINESS PHONE: 8645978000 MAIL ADDRESS: STREET 1: 203 EAST MAIN STREET CITY: SPARTANBURG STATE: SC ZIP: 29319 FORMER COMPANY: FORMER CONFORMED NAME: ADVANTICA RESTAURANT GROUP INC DATE OF NAME CHANGE: 19980107 FORMER COMPANY: FORMER CONFORMED NAME: FLAGSTAR COMPANIES INC DATE OF NAME CHANGE: 19930722 FORMER COMPANY: FORMER CONFORMED NAME: TW HOLDINGS INC DATE OF NAME CHANGE: 19920703 FILED BY: COMPANY DATA: COMPANY CONFORMED NAME: MELLON HBV ALTERNATIVE STRATEGIES LLC CENTRAL INDEX KEY: 0001218315 IRS NUMBER: 134050836 STATE OF INCORPORATION: DE FISCAL YEAR END: 1231 FILING VALUES: FORM TYPE: SC 13D BUSINESS ADDRESS: STREET 1: 200 PARK AVE STREET 2: STE 3300 CITY: NEW YORK STATE: NY ZIP: 10166-3399 BUSINESS PHONE: 2128083941 MAIL ADDRESS: STREET 1: 200 PARK AVE STREET 2: STE 3300 CITY: NEW YORK STATE: NY ZIP: 10166-3399 SC 13D 1 denny13d.txt SCHEDULE 13D DENNY'S CORPORATION Page 1 of 4 SCHEDULE 13D (Rule 13d-101) SECURITIES AND EXCHANGE COMMISSION WASHINGTON, D.C. 20549 Under the Securities Exchange Act of 1934 Amendment No. -------- DENNY'S CORPORATION ------------------------------------------------------------------------------- (Name of Issuer) Common Stock, $0.01 par value ------------------------------------------------------------------------------- (Title of Class of Securities) 24869P104 ------------------------------------------------------------------------------- (CUSIP Number) Mellon HBV Alternative Investment Strategies LLC 200 Park Avenue, Suite 3300 New York, NY 10166-3399 (212) 808-3950 ------------------------------------------------------------------------------- (Name, Address and Telephone Number of Person Authorized to Receive Notices and Communications) February 13, 2004 - ------------------------------------------------------------------------------- (Date of Event which Requires Filing of this Statement) If the filing person has previously filed a statement on Schedule 13G to report the acquisition which is the subject of this Schedule 13D, and is filing this schedule because of Rule 13d-1(e), 13d-1(f) or 13d-1(g), check the following box. Note: Schedules filed in paper format shall include a signed original and five copies of the schedule, including all exhibits. See Rule 13d-7(b) for other parties to whom copies are to be sent. *The remainder of this cover page shall be filled out for a reporting person's initial filing on this form with respect to the subject class of securities, and for any subsequent amendment containing information which would alter disclosures provided in a prior cover page. The information required on the remainder of this cover page shall not be deemed to be "filed" for the purpose of Section 18 of the Securities Exchange Act of 1934 ("Act") or otherwise subject to the liabilities of that section of the Act but shall be subject to all other provisions of the Act (however, see the Notes). - ------------------------------------------------------------------------------- 1 NAME OF REPORTING PERSONS S.S. OR I.R.S. IDENTIFICATION NO. OF ABOVE PERSON Mellon HBV Alternative Strategies LLC I.R.S. No.: 13-4050836 - ------------------------------------------------------------------------------- 2 CHECK THE APPROPRIATE BOX IF A MEMBER OF A GROUP* (a) (b) - ------------- ----------------------------------------------------------------- 3 SEC USE ONLY - ------------------------------------------------------------------------------- 4 SOURCE OF FUNDS* OO - -------------------------------------------------------------------------------- 5 CHECK IF DISCLOSURE OF LEGAL PROCEEDINGS IS REQUIRED PURSUANT TO ITEMS 2(d) OR 2(e) - -------------------------------------------------------------------------------- 6 CITIZENSHIP OR PLACE OF ORGANIZATION Delaware - -------------------------------------------------------------------------------- NUMBER OF SHARES BENEFICIALLY OWNED BY EACH REPORTING PERSON WITH - -------------------------------------------------------------------------------- 7 SOLE VOTING POWER 3,244,000 - -------------------------------------------------------------------------------- 8 SHARED VOTING POWER 0 - -------------------------------------------------------------------------------- 9 SOLE DISPOSITIVE POWER 3,244,000 - -------------------------------------------------------------------------------- 10 SHARED DISPOSITIVE POWER 0 - ------------------------------------------------------------------------------- 11 AGGREGATE AMOUNT BENEFICIALLY OWNED BY REPORTING PERSON 3,244,000 - ------------------------------------------------------------------------------- 12 CHECK BOX IF THE AGGREGATE AMOUNT IN ROW (11) EXCLUDES CERTAIN SHARES* - ------------------------------------------------------------------------------- 13 PERCENT OF CLASS REPRESENTED BY AMOUNT IN ROW (11) 8% - ------------------------------------------------------------------------------- 14 TYPE OF REPORTING PERSON* IA - ------------------------------------------------------------------------------- *SEE INSTRUCTIONS BEFORE FILLING OUTss. INCLUDE BOTH SIDES OF THE COVER PAGE, RESPONSES TO ITEMS 1-7 (INCLUDING EXHIBITS) OF THE SCHEDULE, AND THE SIGNATURE ATTESTATION. Introduction: As further described in this Schedule 13D, the Reporting Person beneficially owns for investment purposes 8% of the Common Stock of Denny's Corporation (the "Company"). Concerned by recent developments suggesting the possibility in the near term of a possible recapitalization of the Company, the Reporting Person notified the Company of its concern and its intention, when and if appropriate, to pursue a course of action necessary to vigorously represent the rights of stockholders in the event of a recapitalization of the Company, or any potential transaction that could have the effect of inappropriately diluting the interest of the Company's stockholders. The Reporting Person's letter to the Company is included as an Exhibit to this Schedule 13D. Item 1. Security and Issuer. Security: Common Stock, $0.01 par value per share ("Common Stock"). Issuer's Name and Address: Denny's Corporation, 203 Main Street, Spartanburg, SC 29319-9966. Item 2. Identity and Background. (a) Mellon HBV Alternative Investment Strategies LLC (the "Reporting Person"). (b) The Reporting Person is a Delaware limited liability company with its principal executive offices located at 200 Park Avenue, Suite 3300, New York, NY 10166-3399. (c) The Reporting Person serves as investment advisor of Mellon HBV Master Rediscovered Opportunities Fund L.P., Mellon HBV Master Multi-Strategy Fund L.P., Axis RDO Ltd. and HFR DS Performance Master Trust (collectively, the "Clients"). None of the Clients individually owns more than 5% but the Clients collectively hold the Shares. (d) During the last five years neither the Reporting Person, nor, to the best of its knowledge, any of its directors or executive officers, has been (i) convicted of any criminal proceeding (excluding traffic violations or similar misdemeanors) or (ii) a party to a civil proceeding of a judicial or administrative body of competent jurisdiction and as a result of such proceeding was or is subject to a judgment, decree or final order enjoining future violations of, or prohibiting or mandating activities subject to federal or state securities laws or finding any violation with respect to such laws. Item 3. Source and Amount of Funds or Other Consideration. The Reporting Person used funds from the working capital of the Clients allocated by such Clients to the Reporting Person for purposes of effecting investment transactions. The Reporting Person used an aggregate of $3,797,065 to acquire the Shares. The Reporting Persons borrowed no funds to purchase any of the Shares. Item 4. Purpose of Transaction. The Reporting Person acquired Common Stock of the Company for investment purposes. The Reporting Person may at any time increase or decrease its position in the securities of the Company. At the present time, the Reporting Person has no intention to effect any of the transactions specified in Item 4 of Schedule 13D. Item 5. Interest in Securities of the Issuer. (a) As of February 23, 2004, the Reporting Person beneficially owned in the aggregate 3,244,000 shares of the Company's Common Stock (the "Shares"), representing approximately 8% of the outstanding Common Stock (based on 40,687,000 shares outstanding as of December 31, 2003, as reported in the Company's Form 8-K filed on February 20, 2004. (b) The Reporting Person has the sole power to vote or to direct the vote and the sole power to dispose and to direct the disposition of the Shares. (c) Information relating to the transactions effected by the Reporting Person with respect to the Company's Common Stock in the past sixty (60) days is set forth in Exhibit A attached hereto. (d) Not applicable. (e) Not applicable. Item 6. Contracts, Arrangements, Understandings or Relationships with Respect to Securities of the Issuer. None, but see Introduction and Exhibit A to this Schedule 13D. Item 7. Material to be Filed as Exhibits. Exhibit A: Letter to the Company from Reporting Person dated February 23, 2004. Exhibit B: Table containing information with respect to open-market transactions in the Common Stock of the Company effected by Reporting Person during the past sixty (60) days. Signature After reasonable inquiry and to the best of my knowledge and belief, I certify that the information set forth in this statement is true, complete and correct. Dated: February 23, 2004 MELLON HBV ALTERNATIVE STRATEGIES LLC, a Delaware Limited Liability Company By: /s/ WILLIAM F. HARLEY III -------------------------------- William F. Harley III President and Chief Executive Officer EX-99 3 dennyexa.txt EXHIBIT A TO SCHEDULE 13D [MELLON HBV LETTERHEAD] February 23, 2004 Nelson J. Marchioli President and Chief Executive Officer Charles F. Moran Chairman of the Board Denny's Corporation 203 East Main Street Spartanburg, South Carolina 29319 Dear Messrs. Marchioli and Moran: Mellon HBV Alternative Strategies LLC, an affiliate of Mellon Financial Corporation, is currently the registered owner of 3,244,000 or 8%, of the common stock of Denny's Corporation. We are aware that Denny's has been discussing a possible financial restructuring with the company's noteholders. Management has assured us that the Board of Directors is dedicated to protecting the interests of the stockholders in this process, and we trust that the Board will fulfill its duty in this regard. In order to assist the Board, we wanted to express our own views about the company, its business and an appropriate capital structure for future growth. We at Mellon HBV believe that Denny's owns an outstanding business that is greatly undervalued by today's capital markets. Denny's adjusted EBITDA margins since 1991 have never been less than 10%. Between 1991 and 2002, EBITDA never fell below $120 million. In 2002, EBITDA was $132 million. Though the company stumbled briefly in the first half of 2003, we believe that this was a temporary problem caused by an unfortunate marketing campaign. Management's prompt and vigorous action has already restored the company to a sound footing. We see no reason why Denny's operating results in 2004 should not be at least as good as 2002's results. Applying a conservative multiple of 6 times 2002 EBITDA to value Denny's business would result in a share price near $5 for the common stock. But that price, though it would be above today's stock market price, would still seriously undervalue the company because it overlooks the important competitive advantages that Denny's gains from its core breakfast business. In fact, we at Mellon HBV believe breakfast is the key to understanding the value of Denny's. Investors may sometimes be drawn to the siren's song of casual dining spots that seem to feature higher margins, a more differentiated product or faster growth, but experience shows that today's hot, trendy dining concept too often becomes tomorrow's discarded fad. Mellon HBV finds much comfort in a dependable franchise business whose bread and butter is a reasonably priced plate of eggs and bacon (with bread and butter). Denny's breakfast focus frees the company from the volatile operating performance that plagues so many players in the casual dining segment. Denny's margins may seem lower and its concept may seem easier to mimic, but its strong execution and steady profitability deserve a higher valuation multiple. The 9-times EBITDA multiple garnered by Steak n' Shake would value Denny's common stock over $14. Applebee's and IHOP both trade around 10 times EBITDA - a similar multiple would value Denny's stock around $18. At the same time, the stable and consistent customer traffic and cash flow that Denny's generates from breakfast provide a strong foundation upon which Denny's can build its lunch and dinner business. While the effort last year to refocus advertising on non-breakfast menu items may have been a case of too much, too soon, we believe that management's general strategic insight is sound. We are confident that management will find a way to grow its lunch and dinner business in conjunction with a renewed emphasis on breakfast. Mellon HBV sees a lot of value in Denny's. We do not share the fear of some analysts that the competitive landscape has suddenly changed in the last year in some way that would render Denny's time-tested business model obsolete. To the contrary, same-store sales for company-run stores have actually increased for five out of the last six years - and with a full recovery from 2003's marketing misstep, we expect that this year's same-store sales will increase again. Moreover, the company's move toward the franchise model promises a future of lower risk, lower capital needs and higher profit margins, while the 200+ company-owned restaurants are a source of substantial hidden asset value. In short, this is a simple, good business that any investor should be happy to own. Because of our enthusiasm for Denny's business model and our belief that management has put operations on the right track, we will insist that any financial restructuring that is negotiated with noteholders must be based on two fundamental principles. First, though we agree that a significant deleveraging of the company on sensible terms would be desirable, Denny's has a stable and mature business that is capable of supporting a substantial debt load. The company's notes are selling at prices near or above par, indicating that the market and note-holders themselves recognize the company's ample capacity to service its debt. A complete equitization of the notes is therefore unnecessary. Second, and more importantly, the company's enterprise value today greatly exceeds its debt, so that there is a large surplus value to which Denny's stockholders are entitled - and that surplus is increasing steadily. Like you, we would prefer to reach agreement with noteholders on sensible terms in the relatively near future, but there is no emergency that requires the company to take hasty action or to make unwise concessions that cost stockholders money. We will strongly oppose any plan that excessively dilutes our rightful ownership of this highly valuable company, and we reserve the right to organize other stockholders to fight any such plan. Over the past six months, we have formed a favorable impression of Denny's management, who have promptly returned our phone calls and thoughtfully answered our questions about the business. We applaud your recent actions, which include the successful return to breakfast-centered advertising and the willingness to proactively address Denny's capital restructuring. If we can assist you in your efforts to reach a fair and reasonable agreement with noteholders, please feel free to contact us at any time. Sincerely, /s/ WILLIAM F. HARLEY III William F. Harley III President and Chief Executive Officer EX-99 4 dennyexb.txt EXHIBIT B TO SCHEDULE 13D Exhibit B Information with Respect to Open-Market Transactions in the Common Stock of the Company effected by the Reporting Person during the Past Sixty (60) Days - --------------------------------------------------------------------------- TradeDate Amount Average Price per share Type of Transaction - --------------------------------------------------------------------------- 2/4/04 160,500 $0.52 Buy 2/5/04 25,000 $0.55 Buy 2/5/04 41,000 $0.59 Buy 2/6/04 200,000 $0.67 Buy 2/6/04 150,000 $0.65 Buy 2/9/04 100,000 $0.75 Buy 2/10/04 250,000 $0.79 Buy 2/12/04 726,000 $1.14 Buy 2/13/04 500,000 $1.34 Buy 2/17/04 300,000 $1.43 Buy 2/18/04 489,000 $1.54 Buy 2/19/04 102,500 $1.68 Buy 2/20/04 200,000 $1.60 Buy
Total 3,244,000 -----END PRIVACY-ENHANCED MESSAGE-----