(Reuters) – The parent of the Uno Chicago Grill pizza chain has filed for bankruptcy after sales fell and ingredient costs rose, and said it agreed on a restructuring that would give bondholders a controlling stake.
Uno Restaurant Holdings Corp and more than 150 affiliates sought Chapter 11 protection from creditors on Wednesday with the U.S. bankruptcy court in Manhattan.
The company said it had agreed with noteholders on a swap that will result in the conversion of $142 million of senior notes into a controlling equity stake. Private equity firm Centre Partners had taken a controlling stake in 2005.
Founded in 1943 as Pizzeria Uno at the corner of East Ohio Street and North Wabash Avenue in Chicago, the company is one of the best-known purveyors of the deep-dish pizza that became synonymous with that city.
Now based in Boston, Uno said it owned or franchised about 179 restaurants in 28 U.S. states and the District of Columbia, as well as Honduras, Kuwait, Puerto Rico, Saudi Arabia, South Korea and the United Arab Emirates.
In a court filing, Chief Financial Officer Louie Psallidas said falling sales had led to losses of $15.1 million in fiscal 2008 and $22.2 million in fiscal 2009, despite Uno’s efforts to cut costs.
“As the national economy suffered and consumers cut discretionary spending, Uno, likes its peers, experienced a significant decline in sales,” Psallidas said.
“Reduced sales, coupled with increased structural costs, including the cost of key commodities, such as energy, wheat, and cheese, negatively impacted cash flow.”
The company recently shut 17 restaurants and said it might close more if it is unable to renegotiate leases. Uno said it had $144.6 million of assets and $171.8 million of long-term debt as of Sept. 27.
The 76 Uno Chicago Grills and two take-out restaurants operated by franchisees have not filed for bankruptcy, court records show.
Uno is also seeking court approval for $52 million of debtor-in-possession financing from Wells Fargo Capital Finance Inc and bondholders to keep operating while in bankruptcy.
The case is In re: Uno Restaurant Holdings Corp, U.S. Bankruptcy Court, Southern District of New York, No. 10-10209. (Reporting by Santosh Nadgir in Bangalore and Jonathan Stempel in New York; Editing by Mike Miller and Lisa Von Ahn)