Cerberus leads bidder pack for Aug. 4 Elephant Bar bankruptcy auction

Elephant Bar, the restaurant chain backed by buyout shop KarpReilly that filed for bankruptcy last month, may still find a buyer.

Bidders for Elephant Bar have until July 30 to submit their offers, according to an order from U.S. Bankruptcy Judge Erithe Smith in Santa Ana, California. Smith, on Tuesday, also approved an Aug. 4 auction of the company.

Elephant Bar already has an offer, in the form of a stalking horse bid, from Cerberus Business Finance, according to court documents. Cerberus is leading a group of creditors, using a $12 million credit bid, which includes the assumption of various liabilities including a debtor-in-possession loan, to buy Elephant Bar, court documents said.

Cerberus Business Finance, the mid-market lending arm of Cerberus Capital Management LP, has $12 million remaining on a $27.4 million loan to Elephant Bar and wants to use that to buy the company, according to court documents. Cerberus is listed as an Elephant Bar creditor, court documents show.

Mastodon Ventures, of Austin, Texas, an advisory firm specializing in the restaurant industry, is handling the auction, court filings said. A number of strategic and financial bidders have looked at Elephant Bar, a source said.

Who owns Elephant Bar?
Founded in 1993, Costa Mesa, California-based Elephant Bar is a casual dining chain that offers dishes with a Pan Asian flair and other recipes from around the world. The restaurant chain features menu items such as Wok-Fired Chicken Lettuce Wraps, Thai Style Tilapia and Misoyaki Salmon, as well as steaks and burgers.

Elephant Bar Global Grill/Wok Kitchen voluntarily filed in June for reorganization under Chapter 11 of the bankruptcy code. The company shut down 16 restaurants and was seeking $3.3 million in DIP financing, according to a statement from the company at the time. Elephant Bar has 29 remaining locations spread through seven states, court filings say.

Elephant Bar isn’t really a KarpReilly deal. Saunders Karp & Megrue, a predecessor firm, invested in Elephant Bar in 2000.

Here’s some background: In 2005, during the height of the buyout boom, Saunders Karp & Megrue merged with Apax Partners in a highly publicized deal. SKM co-founder Allan Karp joined Apax and became co-CEO. Chris Reilly, an SKM partner, also joined Apax, where he was head of the U.S. consumer and retail group. A year later, both Karp and Reilly resigned, forming their namesake firm in early 2007. KarpReilly, of Greenwich, Connecticut, invests in restaurants, consumer products and building products. In January 2013, KarpReilly said it collected $360 million with two funds, including the firm’s flagship pool that closed at $210 million. The other, KarpReilly Co-Investment Fund II LP, collected about $150 million.

KarpReilly began overseeing the remaining SKM companies when the founders left Apax, a source said. KarpReilly also oversaw Ollie’s Bargain Outlet, another SKM investment, which was sold in 2012 to New York buyout shop CCMP Capital Advisors LLC.

The Elephant Bar investment came from SKM Equity Fund III LP, which closed at $720 million in 2000, court documents show. It is unclear how much the firm invested. Chris Reilly is also listed as a creditor.

The PE firm has a strong focus on restaurants. Other KarpReilly investments include Cafe Rio, Burger Lounge, Cafe Zupas and Hooters. Cafe Rio, also an SKM deal, was interviewing banks ahead of an expected IPO, the Wall Street Journal reported in March. KarpReilly last year sold Miller’s Ale House to Atlanta buyout shop Roark Capital Group.

Cerberus declined comment. Executives of KarpReilly and Elephant Bar could not be reached comment.

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