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August 5, 2019 − Perkins & Marie Callender’s, LLC and nine affiliated Debtors (the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 19-11743. The Debtors, operators and franchisors of approximately 400 family-dining and casual-dining restaurants under the Perkins Restaurant and Bakery (“Perkins”) and Marie Callender’s brands, are represented by Daniel J. DeFransceschi of Richards, Layton Finger. Further board-authorized engagements include (i) Akin Gump as general bankruptcy counsel, (ii) Houlihan Lokey, Inc as investment banker and (iii) FTI Consulting (“FTI”) as financial advisor.
The Debtors’ lead petition notes between 1,000 and 5,000 creditors; estimated assets between $50.0mn and $100.0mn; and estimated liabilities between $50.0mn and $100.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) US Foods ($3.8mn trade debt), (ii) Justin Norwalt ($TBD contingent litigation settlement) and (iii) Batory Foods ($246k trade debt).
The Debtors previously filed for Chapter 11 protection in June 2011.
In a press release announcing the Chapter 11 filing (just above the free pancake day release), the Debtors stated that they had "executed an Asset Purchase Agreement with Perkins Group LLC for the sale of its Perkins’ business and a segment of its Foxtail bakery business. In order to facilitate the sale, the Company has voluntarily commenced Chapter11 proceedings under the U.S. Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Company has an agreement with its existing lenders to provide debtor-in-possession (‘DIP’) financing to ensure an efficient bankruptcy process. The Company expects to have enough liquidity to continue to operate in the normal course while completing the sale process. The Company is continuing discussions with investors and potential buyers regarding the Marie Callender’s restaurants."
Objectives of the Chapter 11 Filing
In Court filings, the Debtors have stated that the "purpose of these Chapter 11 Cases is to, among other things, facilitate a sale or sales of substantially all of the Debtors’ assets (the 'Assets') pursuant to section 363 of the Bankruptcy Code."
The Debtors and Houlihan Lokey have already run an extensive marketing effort and have a stalking horse for the Debtors' Perkins assets. The Warne Declaration (defined below) states: "[In January 2019]…the Debtors retained Houlihan Lokey Capital, Inc. ('Houlihan')…to assist them with, among other things, exploring a potential sale of the Debtors’ Assets, whether pursuant to an in- or out-of-court sale of the Debtors’ Assets, an investment in P&MC or any of its subsidiaries, or a carve-out and asset sale of any of the operating business units (i.e., Perkins, Marie Callender’s and/or Foxtail). As part of this effort, Houlihan began a robust marketing process and contacted approximately one hundred and twenty (120) potential strategic and financial acquirers to garner interest in pursuing a possible transaction….the Debtors…ultimately selected Perkins Groups LLC as the stalking horse purchaser to purchase substantially all of the Debtors’ Perkins Assets and certain of the Foxtail Assets. In addition, the Debtors are currently in discussions with various third parties regarding the sale of all or a portion of the Marie Callender’s Assets and all of the Foxtail Assets (including the Foxtail Assets for which there is currently a stalking horse purchaser, subject to a higher or better offer being received for such Assets), including exploring whether a stalking horse(s) can be identified for the purchase of such Assets."
Events Leading to the Chapter 11 Filing
In a declaration in support of the Chapter 11 filing (the “Warne Declaration”), Jeffrey D. Warne, the Debtors’ President and Chief Executive Officer, detailed the events leading to the Debtors’ Chapter 11 filing. The Warne Declaration states: "In 2017 and 2018, the Debtors’ financial performance was affected by: (i) a decline in sales across the family-dining and casual-dining industries due to decreased guest-traffic; (ii) the compounding impact of negative Perkins and Marie Callender’s sales in 2017 and 2018 on Foxtail—a captive and material vendor to the restaurants; (iii) an elevated commodity environment; (iv) statutory increases in labor costs; (v) an increasingly tight labor market; (vi) lower overhead absorption at Foxtail following the loss of a large customer in 2017; and (vii) operational inefficiencies at Foxtail due to initial onboarding costs for new third-party customers in 2018."
About the Debtors
The Debtors are leading operators and franchisors of family-dining and casual-dining restaurants, under their two (2) highly-recognized brands: (i) their full-service family dining restaurants located primarily in Minnesota, Iowa, Wisconsin, Ohio, Pennsylvania and Florida under the name “Perkins Restaurant and Bakery” (“Perkins”) and (ii) their mid-priced, full-service casual-dining restaurants, specializing in the sale of pies and other bakery items, located primarily in California and Nevada under the name “Marie Callender’s Restaurant and Bakery” (“Marie Callender’s”).
Perkins, founded in 1958, offers a full menu of approximately ninety (90) assorted breakfast, lunch, dinner, snack and dessert items. Breakfast items, which are available throughout the day, account for a majority of the entrees sold in the Perkins restaurants.
Marie Callender’s, founded in 1948, has one of the longest operating histories within the full-service dining sector. Marie Callender’s is known for serving quality food in a warm and pleasant atmosphere and for its premium pies that are baked fresh daily. As of the Petition Date, the Debtors own one hundred and eleven (111) Perkins restaurants located in eleven (11) states, and franchise two hundred and fifty five (255) Perkins restaurants located in thirty (30) states and four (4) Canadian provinces.
Similarly, as of the Petition Date, the Debtors own and/or operate twenty-eight (28) Marie Callender’s restaurants located in three (3) states, and franchise twenty-one (21) Marie Callender’s restaurants located in two (2) states and Mexico. Thus, the Debtors own, operate or franchise over four hundred (400) restaurants throughout the United States, Canada and Mexico.
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