Friendly Ice Cream Corp., the 76-year-old restaurant chain known for its ice cream and hamburgers, won bankruptcy court approval of guidelines that will govern the auction of virtually all its assets.
U.S. Bankruptcy Judge Kevin Gross, at a hearing today in Wilmington, Delaware, gave Friendly permission to sell the business at a Dec. 22 auction after creditor objections were resolved.
The company reached an agreement with an affiliate of its current owner, private-equity firm Sun Capital Partners Inc., which will set the floor for bids at the auction, according to court documents. All other offers to compete in the auction must be submitted by Dec. 20. Gross will consider approving the sale at a hearing set for Dec. 29.
Friendly, which opened in 1935 with one shop in Springfield, Massachusetts, sought bankruptcy protection last month citing the struggling economy and rising commodity costs. Debt is about $297 million and assets are valued at more than $100 million, according to court documents.
The Wilbraham, Massachusetts-based company, commonly known as “Friendly’s,” closed 63 sites as part of the bankruptcy filing. Another 424 locations will stay open, Friendly said.
Friendly also won final court approval of a $71.3 million loan to help fund operations while it pursues the sale. The Sun Capital affiliate is participating in the loan, capping its funding at $35 million, according to Neil E. Herman, a lawyer for Sun Capital.
Potential buyers will have to offer about $75 million in cash to qualify for the auction. That represents the amount to pay the loan with interest, expense reimbursement and an overbid, Herman told Gross. Bidders were originally told they would have to put up $122.6 million to compete at the auction, court papers show.
The case is In re Friendly Ice Cream Corp., 11-13167, U.S. Bankruptcy Court, District of Delaware (Wilmington).