Real Mex Restaurants, which is backed by Sun Capital Partners, said Tuesday that it has filed for chapter 11 bankruptcy protection. GE Capital has committed to fund a $49 million DIP loan for Real Mex. Cypress, Calif.-based Real Mex said it’s also exploring a deal to sell all of its assets. Real Mex owns El Torito Restaurants, Acapulco Mexican Restaurants, Chevys Fresh Mex, Sinigual Restaurants as well as Las Brisas Restaurant in Laguna Beach. Sun Capital, a Boca Raton, Fla.-based PE firm, also owns Friendly’s, which is believed to be near filing for Chapter 11.
Real Mex Restaurants, Inc. (“Real Mex” or “the Company”) today announced that it and its parent company and subsidiaries have filed voluntary petitions to restructure under Chapter 11 to facilitate the Company’s ongoing capital restructuring. The corporate restructuring process will not impact the Company’s restaurants or food production subsidiary, which will be open for business as usual.
Real Mex has received a commitment from General Electric Capital Corporation, pending court approval, to have access to $49 million in debtor in possession (DIP) financing, which will enable the Company to continue paying suppliers, vendors, employees and others in the normal course of business.
“After exploring all options over the past several months, we concluded that this is the best and quickest way to complete our financial restructuring while minimizing disruption to our restaurants,” said Real Mex Chairman & CEO David Goronkin, who joined Real Mex earlier this year. “Most of our restaurants generate meaningful cash flow, and based on improving satisfaction scores across our core brands, guests are beginning to respond positively to the changes we’re making to improve. We are taking this difficult but necessary step to allow us to move forward more quickly and fully implement our turnaround plan that we have discussed with our lenders over the last several months.”
In recent months Real Mex has recruited new leadership talent for some of its brands and implemented several changes designed to improve all aspects of the guest experience. The Company cited a weak economic environment, particularly in California where most of its restaurants are located, high debt levels and certain above-market rents as the primary drivers in the need for a comprehensive capital restructuring. During the restructuring process, which is expected to be completed during the first quarter of 2012, it will be business as usual at its restaurants and Real Mex Foods subsidiary.
General Electric Capital Corporation to Provide $49 Million in DIP Financing
General Electric Capital Corporation has made a commitment, pending court approval, to fund a $49 million DIP facility to the Company to supplement the cash generated by its ongoing operations and to pay the costs of administration. The Company’s ability to obtain borrowings under such facility, if it is entered into, will be subject to satisfaction of customary conditions and receipt of court approval. Upon approval, this DIP facility would be immediately available to fund the Company’s operations, pay its vendors and for other corporate purposes.
Ongoing Discussions with Bondholders Concerning a Possible Sale Transaction
Real Mex is exploring a transaction to sell all of its assets and is actively engaged in early discussions with representatives of the Company’s 14% Senior Secured Notes due 2013 (the “Notes”) concerning a possible purchase. No agreement has been reached and any sale transaction would be subject to the solicitation of higher or otherwise better offers pursuant to a specified bidding and sale process administered under Chapter 11 court supervision.
Mr. Goronkin noted, “We are hopeful that our ongoing, fruitful dialogue with our noteholders will lead to an orderly sale process for the Company’s assets, which we believe could provide a quicker and more definitive resolution for employees, vendors, customers and creditors alike. In essence, we would seek to make the noteholders’ interest in acquiring the Company’s assets the catalyst for a competitive, orderly process intended to maximize value and reduce uncertainty for all of our stakeholders.”
About Real Mex
Headquartered in Cypress, California, Real Mex Restaurants is the largest full-service, casual dining Mexican restaurant chain operator in the United States with 166 company owned and operated restaurants as well as 20 franchised restaurants. Our brands include El Torito Restaurants, Acapulco Mexican Restaurants, Chevys Fresh Mex(R) Restaurants, Sinigual Restaurants, Las Brisas Restaurant in Laguna Beach, and several regional restaurant concepts. In addition, our Real Mex Foods division is a custom manufacturer of foodservice products specializing in soups, sauces, salsas, starches and proteins in a modern USDA-certified facility as well as a provider of broadline foodservice distribution to restaurants.