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Cheap commods little aid to restaurants

NEW YORK (Reuters) - Lower commodity prices are helping restaurants cut costs, but that benefit has been offset by plunging revenue due to the recession, the hedge fund that runs the Bennigan's restaurant chain said on Wednesday.

"If you look at the portfolio of restaurant investments, there's no question that the downdraft in commodity prices is helping out now," said Ivan Zinn, chief executive officer of Atalaya Capital Management, which bought the Bennigan's chain out of bankruptcy in October through an affiliate,

"Unfortunately, revenues have come down in the portfolio of companies that we see -- numbers that would offset any benefit from the cost reduction," Zinn told the Reuters Private Equity and Hedge Funds Summit in New York.

He estimated that same-store sales at Bennigan's -- sales at outlets open for more than a year -- had fallen between 10 and 15 percent, negating a 30 percent to 40 percent drop in commodity costs as energy and grain prices tumbled from last summer's record highs.

"Certainly, some public companies have reported (same-store sales) numbers worse than that. You can't make that up in the cost of goods. You can't make that up in commodity prices," Zinn said.

Sit-down restaurants in the United States have suffered in the past year as diners try to save money amid falling home and investment values, rising unemployment and reduced access to credit.

Listed U.S. restaurant chains hit by recession include Louisville, Kentucky-based Texas Roadhouse Inc (TXRH.O: Quote, Profile, Research, Stock Buzz), which posted a 15 percent fall in net income for the fourth quarter.

P.F. Chang's China Bistro (PFCB.O: Quote, Profile, Research, Stock Buzz), an Asian-themed restaurant chain based in Scottsdale, Arizona, topped market expectations for the fourth-quarter. But it cautioned that consolidated revenue was likely to be flat in 2009 and pared its expansion plans.

Bennigan's, an Atlanta-based casual dining chain founded in 1976, had about 300 restaurants in its chain when Atalaya acquired the company's equity, trademarks and other assets, including the Tavern and Steak & Ale Brands.

The plunge in commodities prices has hurt Atalaya, a New York-based investment fund and lender, in some ways.

Some oil service companies the fund was invested in have been seeing weak business due to low oil prices, Zinn said.

"Customers of theirs aren't showing up; and if they're showing up, it's in fewer numbers," he said.

Since September, the number of U.S. rigs drilling for oil and natural gas has dropped almost 50 percent to 1,085, the sharpest decline since 1986, according to data from oil services company Baker Hughes Inc (BHI.N: Quote, Profile, Research, Stock Buzz).

Benchmark prices for U.S. crude oil, at an all-time high of nearly $150 a barrel last July, were below $33 in January before rebounding last week to above $50.