[Letterhead of Shoney's, Inc.]
July 25, 2000
To Holders of Shoney's, Inc.
8-1/4% Convertible Subordinated Debentures Due 2002 and
Liquid Yield Option Notes Due 2004 (Zero Coupon - Subordinated)
Shoney's, Inc. is offering to purchase all of our outstanding
$51,563,000 principal amount of 8-1/4% Convertible Subordinated Debentures
Due 2002, CUSIP No. 872623AA1 (Debentures) and $177,358,000 principal amount
at maturity of Liquid Yield Option Notes Due 2004, CUSIP No. 825039AC4
(LYONS). The purpose of this letter is to call your attention to certain
important information regarding our offer.
* The purchase price for the Debentures is $691.59 per $1,000
principal amount, plus accrued and unpaid interest, in cash.
* The purchase price for the LYONS is $250.00 per $1,000
principal amount at maturity in cash.
* THE OFFER WILL EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON
AUGUST 14, 2000, UNLESS EXTENDED.
As many of you know, our Company has experienced significant losses in
recent years and has an accumulated deficit of over $150,000,000. As of July
12, 2000, our common stock was suspended from trading on the New York Stock
Exchange because we failed to satisfy that exchange's continued listing
standards for net worth and market value. The offer described above is part
of our plan to reorganize our operating and financial structure. We intend
to divide our Shoney's and Captain D's restaurant operations into separate
companies and then finance the two new companies separately.
Our Board of Directors determined that, before completing this planned
reorganization, holders of our Debentures and LYONS should have the
opportunity to sell their securities to the Company at a premium to market.
So far, holders of 73% of the Debentures and 70% of the LYONS have agreed to
sell their securities in our offer.
You have only a short time left to decide to join these holders by
tendering your securities. In making your decision, you should be aware of
a number of significant risks that will affect your investment if you decide
not to participate.
1) As part of our planned reorganization, we expect to incur
more than $250,000,000 of additional senior secured debt.
Substantially all of our assets will be pledged to secure
this new debt. Any remaining Debentures or LYONS will be
subordinate to all of this new debt. There can be no
assurance
that we will be able to meet our obligations to pay
principal or interest on any Debentures or LYONS that remain
outstanding after expiration of our offer.
2) There may be no active trading market for any remaining
Debentures or LYONS after completion of the offer. As a
result, you may have difficulty selling your securities
after expiration of the offer.
3) The indenture amendments that would be made as a result of
our offer will eliminate substantially all covenants
limiting the way we operate and finance our business. As a
result, remaining holders will no longer benefit from those
protections against potentially significant adverse
consequences.
If you want to participate in the offer, you must make the necessary
arrangements promptly. IN PARTICULAR, IF YOUR SECURITIES ARE HELD THROUGH A
BROKER, DEALER, BANK, TRUST COMPANY OR OTHER NOMINEE, YOU WILL NEED TO
INSTRUCT THAT FIRM TO TENDER THE SECURITIES ON YOUR BEHALF. Since this
procedure may take a considerable amount of time, you should give these
instructions as soon as possible.
THE OFFER IS SCHEDULED TO EXPIRE AT 11:59 P.M., NEW YORK CITY TIME, ON
AUGUST 14, 2000.
The complete terms of the offer are contained in our Offer to Purchase
and Consent Solicitation Statement dated July 18, 2000, which has been sent
to you previously. We encourage you to read the document carefully. The
offer is subject to certain conditions, including receipt of financing and at
least 90% of the Debentures and at least 90% of the LYONS being tendered.
If you need assistance making arrangements to tender your securities,
please call the Information Agent for the offer, D.F. King & Co., at (888)
242-8157. If you have any questions about the offer, please call the Dealer
Manager for the offer, Banc of America Securities, at (888) 292-0070.
Our Company is grateful for the support that we have received so far for
our reorganization plan, and we appreciate your consideration.
Sincerely,
/s/ Raymond D. Schoenbaum
Raymond D. Schoenbaum
Chairman of the Board
