(Reuters) – Magic Brands LLC, the parent of the Fuddruckers and Koo Koo Roo restaurant chains, filed for bankruptcy protection on Wednesday and said it had agreed to sell most of its assets to Tavistock Group for $40 million.
The Austin, Texas-based company said it planned to close 24 Fuddruckers restaurants it operates by April 30 as part of the Chapter 11 reorganization process.
It said more than 200 restaurants will remain open, including 135 Fuddruckers restaurants operated by franchisees and which are not part of the filing. The company’s operations also include 13 Koo Koo Roo restaurants in California.
Peter Large, Magic’s chief executive, said in a statement the proposed sale would allow Fuddruckers to restructure its finances, shed “burdensome leases” and remodel restaurants.
Fuddruckers specializes in hamburgers, and Koo Koo Roo in chicken.
Many casual dining chains have struggled as consumers burdened in a weakened economy choose cheaper dining options, including dining at home.
Tavistock is a private investment firm founded by Joe Lewis, a British billionaire who lost an estimated several hundred million dollars in early 2008 by investing in Bear Stearns Cos.
In a court filing, Magic lawyers said the company has been closing money-losing restaurants to boost earnings and restore positive cash flow. They said the Chapter 11 filing lets Magic finish the restructuring and position itself to be sold.
Magic plans to allow other bidders to submit higher bids in a court-supervised procedure.
A sale requires court approval, and the company expects the sale process to be completed within 60 to 90 days.
Wells Fargo Capital Finance Inc is providing $14 million of financing to keep Magic operating while in bankruptcy.
Magic was advised by FocalPoint Securities LLC and the law firm Goulston & Storrs.
In its filing with the U.S. bankruptcy court in Wilmington, Delaware, Magic said it had between $1 million and $10 million of assets, and $10 million to $50 million of liabilities. Four affiliates also filed for bankruptcy protection.
The case is In re: Magic Brands LLC, U.S. Bankruptcy Court, District of Delaware, No. 10-11310. (Reporting by Jonathan Stempel; editing by Ted Kerr and Andre Grenon)