June 13 (Bloomberg) -- Perkins & Marie Callender’s Inc., the owner or franchiser of about 600 restaurants, filed for bankruptcy with a plan to restructure debt that would give control of the company to Wayzata Investment Partners LLC.
Holders of all of Perkins’s secured notes and more than 80 percent of its unsecured notes agreed to the proposed restructuring, which must be completed by Oct. 21, according to a statement today. The Memphis, Tennessee-based company said it will close 58 restaurants as part of the plan.
“The agreement reached with our noteholders will allow the company to restructure its balance sheet on a expedited basis, strengthen its restaurant operations, and ensure the long-term viability of the company,” Jay Trungale, Perkins’s chief executive officer, said in the statement.
The company listed assets of $290 million and debt of $441 million in today’s Chapter 11 filing in U.S. Bankruptcy Court in Wilmington, Delaware. Trungale said in November that “the languishing economy, including declines in consumer confidence and sluggish consumer spending and increased commodity costs” hurt its Perkins Restaurant and Marie Callender’s chains in the quarter ended Oct. 3.
Wells Fargo Capital Finance LLC agreed to provide Perkins with $21 million in debtor-in-possession financing to fund operations while it restructures, according to the statement. Under the accord with noteholders, the company must submit a reorganization plan by July 14.
Holders of senior secured notes agreed to a two-year maturity extension and unsecured creditors will convert their claims into all the new equity of the reorganized company, Perkins said. Funds managed by Wayzata, a private-equity firm based in Wayzata, Minnesota, will get majority control.
Founded in 1958 as a pancake house in Ohio, Perkins has 12,350 full- and part-time employees at restaurants in the U.S. Midwest, Florida, Pennsylvania and Canada. Buyout firm Castle Harlan Inc. acquired the company in 2005 for $245 million in cash.
In addition to its restaurants, the company sells pies, muffins, batters and other bakery products to customers including supermarkets, court filings show.
Sales in the 2010 third quarter fell to $108.7 million from $115.5 million a year earlier as the net loss widened to $12.3 million from $11.2 million. Costs rose for staples such as dairy, eggs, seafood and pork, along with labor and benefit expenses, according to a quarterly report.
Restaurant companies already in bankruptcy include Sbarro Inc., operator of more than 1,000 pizza restaurants. Bennigan’s and Steak & Ale, both owned by Metromedia Restaurant Group; Uno Restaurant Holdings Corp. and Buffets Holdings all filed for bankruptcy during the past three years.
Perkins didn’t make a $9.5 million interest payment due April 1 on $190 million of 10 percent senior unsecured notes that mature in October 2013. Standard & Poor’s lowered its rating on the company, saying it probably wouldn’t make a May 31 payment either.
The notes traded on June 7 at 15 cents on the dollar, according to Trace, the bond-price reporting system of the Financial Industry Regulatory Authority.
Holders of the 10 percent notes might recover nothing or as much as 10 cents on the dollar after a default, S&P said. Holders of the $132 million in second-lien, 14 percent notes due in May 2013 might get as much as 50 percent, S&P said.
The case is In re Perkins & Marie Callender’s Inc., 11-11795, U.S. Bankruptcy Court, District of Delaware (Wilmington).
To contact the reporters on this story: Dawn McCarty in Wilmington, Delaware, at firstname.lastname@example.org; Phil Milford in Wilmington, Delaware, at email@example.com; Heather Smith in Paris at firstname.lastname@example.org.