Bankrupt restaurant chain’s survival rests on key deal
The restaurant sector has faced financial distress this year, with rising costs caused by inflation, increased interest rates, and consumers’ increasing discrimination about their dining choices.
Some dining establishments still blame the lingering effects of the Covid-19 pandemic for their problems.
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Most of the names of restaurant chains that filed for bankruptcy are familiar to most consumers:
- Red Lobster.
- TGI Fridays.
- Rubios Coastal Grill.
- Burger Fi International.
Related: Iconic trucking company unexpectedly closes, no bankruptcy yet
However, those are just some popular dining establishments that filed Chapter 11 in 2024.
Popular Italian restaurant chain looks for a lifeline
The popular Italian restaurant chain Buca di Beppo filed for Chapter 11 bankruptcy protection on Aug. 4 to reorganize its business with the support of its lenders.
The Orlando, Fla.-based fast-casual restaurant chain’s largest equity holder, Buca Investments, and nine affiliates filed their petitions in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas, listing $10 million to $50 million in liabilities.
The debtors received approval for joint administration of their cases.
Related: Distressed hospital chain files for Chapter 11 bankruptcy
The debtors said the chain’s operations “have been impacted by a significant drop in sales, rising food and labor costs, continued staffing challenges, and changes to customers’ preferences,” according to court papers.
Buca di Beppo closed 13 underperforming locations in the week before it filed bankruptcy, which included restaurants in Sacramento and Salt Lake City. The debtor had 44 remaining locations in 14 states after the closings that it planned to sell in a bankruptcy auction.
“This is a strategic step towards a strong future for Buca di Beppo,” company president Rich Saultz said in the statement after filing Chapter 11. “While the restaurant industry has faced significant challenges, this move is the best next step for our brand. By restructuring with the continued support of our lenders, we are paving the way toward a reinvigorated future.”
The family-style Italian restaurant chain, which was established in Minneapolis in 1993, grew to as many as 95 locations by 2013 before it began closing restaurants.
More bankruptcy stories:
- Another popular pizza chain files for Chapter 7 bankruptcy
- Distressed retail chains file for Chapter 11 bankruptcy
- Iconic restaurant chain files bankruptcy after closing locations
The restaurant chain was purchased by Robert Earl’s Planet Hollywood International in 2008 and was owned by Earl Enterprises when it filed for Chapter 11 protection and sought a sale of its assets in a Section 363 bankruptcy auction.
Buca’s prepetition lender, Main Street Capital Corp., provided it with a $47 million first-lien term loan in June 2015, according to a declaration from the debtor’s Chief Restructuring Officer, William Snyder.
Main Street sent the debtor default notices in December 2020, March 2021, December 2022, May 2023, January 2024, and April 2024.
The debtor and lender amended the loan agreement on several occasions over the years, only to have the debtor subsequently default on the loan multiple times, according to court papers.
The debtor’s liquidity problems and inability to maintain loan payments led to its Chapter 11 filing. About $38.9 million is owed to Main Street.
Buca di Beppo sells assets to lender
The debtor and lender agreed for Main Street to provide $36.3 million in debtor-in-possession financing after the bankruptcy filing, with $12.1 million in new money and a rollup of $24.2 million in prepetition debt.
The debtor also reached an asset purchase agreement with Main Street for a $27 million credit bid to purchase the assets if no qualified bids were submitted to purchase the dining chain.
Buca di Beppo received no qualified bid by the Oct. 2 bid deadline, and Main Street’s stalking-horse bid was designated as the winning bid for the assets.
Judge Stacey Jernigan on Nov. 4 signed an order approving the sale of all of Buca di Beppo’s assets to Main Street.
Approval of the sale is the first step in wrapping up and confirming a Chapter 11 plan.
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