Sbarro said to prepare bankruptcy filing

Sbarro, the Melville-based international pizza purveyor, has three

Sbarro, the Melville-based international pizza purveyor, has three locations on Long Island: Sunrise Mall in Massapequa, Green Acres Mall in Valley Stream and Broadway Mall in Hicksville. (Credit: Sbarro)

Sbarro, the Melville-based Italian restaurant chain that's a fixture in mall food courts, is preparing a bankruptcy filing after a nine-month review of its operations, according to people familiar with the situation.

The move, which could happen in the coming weeks, would let the pizza chain restructure as it struggles with sluggish demand and debt costs, said the people, who asked not to be identified because the matter isn't public.

The filing would represent the company's second trip to bankruptcy court in the past three years. Sbarro first sought protection from creditors in April 2011, citing slower sales and higher costs for ingredients such as cheese. As part of its latest efforts to streamline the company, Sbarro announced plans last month to close 155 locations in North America.

Jonathan Dedmon, a spokesman for the company at the Dilenschneider Group, declined to discuss a possible bankruptcy.

"During the past nine months, our new management team and its advisers have been thoroughly evaluating our business," he said. "We are making significant progress. Sbarro continues to be a strong brand with a bright future."

Sbarro's comeback has been led by David Karam, who took over as chief executive last year. He previously worked as an executive at fast-food chain Wendy's Co.

Founded in 1956 by the Sbarro family, the chain expanded its pizza empire over the decades to more than 40 countries. MidOcean Partners, a New York private-equity firm, acquired the closely held business in 2007 for $417 million. Then came the recession, which meant fewer consumers visiting shopping malls and eating at food courts.

Since emerging from bankruptcy in 2011, the company hasn't made enough progress improving its operations, according to a report in January from Standard & Poor's Ratings Services, which downgraded Sbarro's credit rating to CCC- from CCC+.

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