Biglari Holdings' $225M Steak n Shake Loan: A Double-Edged Sword for Capital Efficiency and Refinancing Risk

In September 2025, Biglari Holdings Inc. executed a significant capital restructuring by securing a $225 million, five-year term loan through its subsidiary, Steak n Shake Inc. The loan, which carries a fixed interest rate of 8.80% and an annual amortization rate of 3.0%, was accompanied by the termination of a $75 million line of credit, netting the company an increase of $150 million in long-term committed capital, according to the SEC filing. This move, while strategically aimed at stabilizing its balance sheet, raises critical questions about capital allocation efficiency and refinancing risk-particularly given Steak n Shake's turbulent financial history.

Capital Allocation Efficiency: Stability at a Cost

The new loan replaces variable-rate, short-term financing with a fixed-rate, long-term obligation, offering predictability in interest costs and reducing liquidity constraints. By distributing the full $225 million in proceeds to Biglari Holdings, the subsidiary effectively channels capital to the parent company, which can deploy it across its portfolio of businesses, according to a Panabee article. This structure mitigates the risk of sudden refinancing needs, a key advantage for a company that has previously faced debt-related legal disputes.

However, the 8.80% interest rate-well above the average for investment-grade corporate bonds in 2025-casts doubt on the cost-effectiveness of this capital raise. For context, the current yield on five-year corporate bonds for companies with a BBB credit rating hovers around 6.2%, according to Bloomberg. Biglari's elevated rate reflects its perceived credit risk, exacerbated by Steak n Shake's history of debt defaults. In 2020, for instance, the chain narrowly avoided bankruptcy after a contentious repayment of $102.5 million on a $220 million loan, leaving lingering disputes over $8.5 million in fees, as reported by Restaurant Business Online. Such precedents suggest lenders demand a premium for financing Biglari's operations.

Refinancing Risk: A Maturity Wall in 2030

While the five-year term provides breathing room, the loan's maturity date of September 30, 2030, creates a refinancing cliff that could strain Biglari's liquidity. At that point, the company will need to either roll over the debt or sell assets to meet obligations. The absence of publicly disclosed covenants-such as interest coverage ratios or debt-to-EBITDA limits-complicates risk assessment, per the SEC EDGAR page. Without these guardrails, there is no clear mechanism to ensure Biglari maintains sufficient cash flow to service the debt as it approaches maturity.

Moreover, Steak n Shake's operational performance remains a wildcard. The chain has undertaken cost-cutting measures, including shifting to counter service and self-service kiosks, to improve profitability, according to Restaurant Dive. Yet, its ability to generate consistent EBITDA will determine whether Biglari can meet interest payments or face pressure to renegotiate terms. If the company's credit profile weakens further, refinancing costs in 2030 could soar, amplifying financial stress.

The Missing Puzzle: Covenant Details and Regulatory Gaps

A critical gap in the analysis lies in the lack of transparency around loan covenants. While the SEC filing states that full terms will be disclosed in Biglari's Q3 2025 10-Q report, the company's revoked Exchange Act registration raises questions about the accessibility of future filings. This opacity leaves investors in the dark about potential triggers for defaults or asset sales. For a company with a history of contentious debt negotiations, such ambiguity is a red flag.

Conclusion: A Calculated Gamble

Biglari Holdings' refinancing strategy offers short- to medium-term stability but hinges on long-term operational and financial discipline. The high-interest loan underscores the company's elevated risk profile, while the absence of covenants leaves refinancing outcomes uncertain. Investors must weigh the immediate benefits of liquidity against the potential for heightened volatility as 2030 approaches. For now, the move buys time-but not without a steep price.