Tags: bankruptcy | recession | restaurant | fast-food

Sbarro Bankruptcy Plan Approved as Fast-Food Chains Retool

Monday, 19 May 2014 12:53 PM

Sbarro LLC, the 800-restaurant U.S. pizza chain, won court approval to leave bankruptcy for the second time in three years as fast-food operators try to cope with a decline in shopping-mall business.

Sbarro filed for bankruptcy March 10, one of a number of chains to suffer as customer traffic slowed in mall food courts. Hot Dog on a Stick, a regional, mall-based company in Southern California, and Quiznos, the Denver-based toasted sandwich chain, also filed for bankruptcy this year.

The Sbarro reorganization plan, already supported by holders of most of the company’s debt when it filed, was approved today by U.S. Bankruptcy Judge Martin Glenn in Manhattan, who said there were no objections.

Landlords for Sbarro’s stores had raised the only protests, over how much money they would get to terminate leases. Their objections were consensually resolved, and Sbarro won permission to close about 190 of its 400 company-owned stores.

A “surge in the cost of cheese and flour and a decline in mall traffic” caused the company’s first bankruptcy in April 2011, and it filed again as mall traffic continued to decline, Glenn said in his ruling.

Economic Slump

Bennigan’s and Steak & Ale, both owned by Metromedia Restaurant Group, and Buffets Holdings Inc. sought court protection in the three years before Sbarro’s 2011 filing, hurt by the worst U.S. economic slump since the Great Depression.

Uno Restaurant Holdings Corp., also a pizza chain; Midland Food Services LLC, the operator of 92 Pizza Hut restaurants in six states; and Commissary Operations Inc., a distributor of food and supplies to chains, also filed for bankruptcy.

Under the plan approved today, Sbarro’s debt will be reduced to $20 million from $148.2 million by converting some loans into exit financing and turning senior pre-bankruptcy debt into common stock in a new company. The company also will save $82 million from rejected leases.

General unsecured creditors will split $1.25 million, according to court papers.

The reorganized company’s earnings are projected to about double to $19.2 million in 2018 from $9.54 million this year, Patrick Fodale, managing director of financial adviser Loughlin Management Partners & Co., said in a court filing.

‘Best Position’

The plan will “best position the company to compete” with other quick-service restaurants, David Meyer, a lawyer for the chain, said today.

Sbarro, based in Melville, New York, was started by Italian immigrants 58 years ago. MidOcean Partners LP acquired the chain in 2007 for $417 million.

Sbarro’s first trip through bankruptcy ended in November 2011 and gave first-lien lenders ownership while eliminating 70 percent of its $486.6 million in debt.

The company listed assets of $175.4 million and liabilities of $165.2 million in its latest Chapter 11 petition.

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Sbarro LLC, the 800-restaurant U.S. pizza chain, won court approval to leave bankruptcy for the second time in three years as fast-food operators try to cope with a decline in shopping-mall business.
bankruptcy, recession, restaurant, fast-food
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2014-53-19
Monday, 19 May 2014 12:53 PM
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