Mrs. Fields Famous Brands LLC plans to cede control to creditors including Carlyle Group LP and Z Capital Partners LLC as the cookie chain refinances debt to return to profitability.
The company, which also owns frozen-yogurt maker TCBY, started the refinancing process Oct. 21 and expects it to conclude Dec. 5, according to a statement today. Mrs. Fields hired Houlihan Lokey to advise on a proposed exchange of debt for equity, said four people with knowledge of the plan.
Mrs. Fields, based in Salt Lake City, may file for a prepackaged bankruptcy if the swap isn’t approved by next month, said the people, who declined to be named as terms are private. Private-equity firms Carlyle and Z Capital hold the majority of the snack vendor’s about $65 million in senior secured notes, they said. The lenders support the refinancing and will become the largest shareholders, Mrs. Fields said.
“They’ve got a lot more competition than they’ve ever had before and it’s just increasing,” Ron Paul, president of Chicago-based restaurant-industry tracker Technomic Inc., said of the Mrs. Fields chain. “It’s been a tough time for restaurants.”
Friendly Ice Cream Corp. and RM Restaurant Holding Corp. both sought bankruptcy protection this year as the industry struggled with surging commodity costs and flagging consumer confidence. Both chains cited the economic slowdown for shrinking sales.
Mrs. Fields, which emerged from bankruptcy three years ago, franchises more than 950 stores under its brand and the TCBY frozen-yogurt banner. Revenue amounted to more than $60 million last year, according to the company.
“Both brands have very good growth strategies and this refinancing really will support those,” Chief Executive Officer Tim Casey said in a telephone interview, referring to Mrs. Fields and TCBY. He declined to elaborate further.
Representatives for Carlyle and Z Capital declined to comment. Houlihan Lokey declined to comment. Carlyle, the Washington-based buyout firm planning to go public next year, also announced today that it bought Churchill Financial LLC to expand its lending business.
Z Capital, based in Chicago, is also among creditors that are in talks to take control of Golden Gate Capital Corp.’s Neways, people familiar with the matter said on Nov. 17.
Debbi Fields opened her first cookie store in Palo Alto, California, in 1977 and began franchising in 1990, according to Mrs. Fields’s website. Capricorn Holdings, a Greenwich, Connecticut-based investment firm, bought Mrs. Fields in 1996 and merged the company with TCBY after acquiring the frozen-yogurt maker in 2000, according to Capricorn’s website.
Mrs. Fields sought bankruptcy protection in 2008 and emerged with bondholders holding a controlling equity stake and Capricorn retaining a minority position in the reorganized company.