Melville-based Sbarro Inc. announced today that it is filing for Chapter 11 bankruptcy protection as part of a deal reached with a majority of its senior lenders to eliminate more than half of its debt and restructure the company.
Sbarro Inc., the chain of quick-service restaurants, said that about 70 percent of its senior note holders agreed to a reorganization plan that will reduce its debt by about $200 million in exchange for equity, leaving the company with about $175 million in debt obligations.
The company is filing for Chapter 11 bankruptcy protection in order "to reorganize its debts and ensure its long-term financial health, while continuing to operate in the normal course of business without interruption during the restructuring process," according to a company press release.
Some of the company's lenders have agreed to finance the restructuring plan with a $35 million debtor-in-posession agreement, which, combined with Sbarro's cash flow from its operations, will allow it to meet its operating expenses. MidOcean Partners III Lp and Ares Corporate Opportunities Fund II, Lp will backstop a $30 million rights offering, using the proceeds to repay the debtor-in-possession loan and provide the reorganized business with "additonal equity capital and liquidity," the company said.
"We believe this plan represents the best opportunity for Sbarro to clear a path for future growth by restructuring its debt in an effective and timely manner," said Nicholas McGrane, Sbarro's interim president and chief executive officer. ". . . We look forward to emerging from this process as quickly as possible with our existing stakeholders, customers, suppliers, landlords and franchises."