Pizza chain Sbarro Inc. has reached an agreement with creditors allowing it to attempt to sell itself out of bankruptcy, Reuters reported. The company is slated to seek court approval for its plans on September 26. Lenders include MidOcean Partners III LP and Ares Corporate Opportunities Fund II LP.
(Reuters) – Bankrupt pizza chain Sbarro Inc [SBARO.UL] can move forward with an attempt to sell itself out of bankruptcy, reaching agreements with creditors who had objected to bidding terms.
Sbarro announced it would make changes to its auction procedures at a hearing on Wednesday in U.S. Bankruptcy Court in Manhattan, quelling concerns from noteholders and other creditors.
Judge Shelley Chapman said she was prepared to approve the new plan, which would broaden terms to allow would-be buyers to bid on portions of the restaurant’s assets as well as the entire business. Sbarro is scheduled on September 26 to seek court approval to send the plan to creditors for a vote.
The auction is part of a so-called “dual track” bankruptcy exit plan that also includes a restructuring option if the auction proves fruitless.
Under the restructuring, Sbarro’s senior lenders would fund a $110 million exit loan comprising $35 million in outstanding debt under Sbarro’s current bankruptcy loan and $75 million of debt from its pre-bankruptcy credit facility.
Another $100 million owed to the lenders would be converted to equity in the reorganized company. The lenders are led by collateral agent Cantor Fitzgerald Securities.
The restructuring would wipe out second lien lenders, led by MidOcean Partners III LP, and unsecured noteholders, including Ares Corporate Opportunities Fund II LP. Those entities could still offer bids at auction.
Melville, New York-based Sbarro, which filed bankruptcy in April, is seeking to get rid of the bulk of its $395 million debt load. The restaurant, which sells pizza, pastas and other Italian foods, has said in court filings that it has had discussions with an unnamed foreign investor it hopes will make a play for its assets.
The Sbarro family started their company as a salumeria, or Italian grocery store, in Brooklyn in 1956 soon after immigrating to the United States from Naples, Italy. Its ubiquitous green, white and red banner is a familiar sight in malls, rest stops and airports.
The case is In re Sbarro Inc, U.S. Bankruptcy Court, Southern District of New York, No. 11-11527.
(Reporting by Nick Brown; Additional reporting by Caroline Humer; Editing by Richard Chang)