Problems at Krispy Kreme

Krispy Kreme's turnaround efforts began in earnest Tuesday with the layoff of about 125 workers, or 25% of the work force, at its corporate headquarters and other key facilities. The struggling doughnut chain also said it was getting rid of its corporate jet to conserve cash. Krispy Kreme said the cuts would affect workers about one quarter of the workers at its Winston-Salem headquarters and at plants where doughnut mix is made, equipment is manufactured and doughnuts are distributed. Krispy Kreme's 360 United States stores are owned and operated by franchisees; as such, they are not affected by the corporate cuts announced Tuesday.

Krispy Kreme said the moves are necessary to avoid a cash crunch. The company said it also will need additional credit to fund operations and capital expenditures by March 25, when a waiver from its primary lenders expires. "There can be no assurance that the company will be able to reach any agreement with the banks or that funding will be available when and in the amounts needed," the company said. Last month, the company's lenders agreed to push back to March 25 a deadline under which the company would be in default of its credit line because it has not filed quarterly financial statements for the period that ended Oct. 31. In the agreement, Krispy Kreme agreed not to borrow any more cash without its lenders' consent.

Krispy Kreme closed at $7.21, down 9.2% for the day and 85% from its all-time high. (When I wrote this post, the stock was trading at $9.64.)