Buffets Holdings Inc., the operator of the Old Country Buffet restaurant chain, won court approval to send its reorganization plan to creditors for a vote.
U.S. Bankruptcy Court Judge Mary F. Walrath approved a so-called disclosure statement, which is written to help creditors decide whether to vote in favor of the plan. Under the plan, first-lien lenders owed about $252 million will trade the right to collect that debt for ownership of Buffets, according to the disclosure statement.
A committee of lower-ranking, unsecured creditors dropped their opposition to the reorganization plan after the company agreed to set up a litigation trust controlled by those creditors and funded with at least $4 million. The trust will pursue lawsuits that may generate more money for unsecured creditors and would share in any proceeds should Buffets be sold sell for more than $200 million, according to the disclosure statement.
“The committee endorses the plan,” the panel said in a letter to unsecured creditors owed about $44.6 million. The company had about 22,800 employees as of January.
Creditor votes are due June 4 and the company will return to court June 13 to seek approval of the plan.
Buffets, based in Eagan, Minnesota, filed bankruptcy in January for the second time in four years with a plan to cut debt by about $245 million. While in bankruptcy, Buffets closed a number of unprofitable restaurants, the company said.
The case is In re Buffets Holdings Inc., 12-10237, U.S. Bankruptcy Court, District of Delaware (Wilmington).