Cosi, Inc. (NASDAQ:COSI), the fast-casual restaurant company, today
announced that it and its subsidiaries filed voluntary Chapter 11
petitions in the United States Bankruptcy Court for the District of
Massachusetts, initiating a process intended to preserve value and
accommodate an orderly going-concern sale of Cosi’s business
operations.
Cosi has obtained approximately $4 million in post-petition
debtor-in-possession (DIP) financing, which, subject to Bankruptcy
Court approval, will provide the Company with liquidity to maintain
its operations in the ordinary course of business during the
Chapter 11 process.
Prior to the Chapter 11 filing, Cosi entered into a non-binding
term sheet with its lenders, AB Opportunity Fund LLC, AB Value
Partners, L.P., and one or more entities affiliated with Milfam II
L.P., pursuant to which the DIP lenders or their designees have
proposed to purchase substantially all of Cosi’s assets and,
subject to Bankruptcy Court approval, would serve as the “stalking
horse” in a sale process under Section 363 of the Bankruptcy
Code. The term sheet is non-binding and the transaction
contemplated thereby is subject to, among other things, Cosi’s
compliance with certain covenants. Cosi intends for such a
sale, if completed, to ensure a smooth and swift transition of the
business and operations to the DIP Lenders or their designees,
which would be supported by a stronger balance sheet due to exiting
underperforming locations and once company assets are sold free of
any claims.
In accordance with the sale process under Section 363 of the
Bankruptcy Code, notice of the proposed sale to the DIP lenders or
their designees will be given to third parties and competing bids
will be solicited. Cosi’s Board of Directors will manage the
bidding process and evaluate the bids, in consultation with
independent professional advisors and as overseen by the Bankruptcy
Court.
Cosi’s Board of Directors unanimously determined that a sale in
Chapter 11 is in the best interest of the Company and its
creditors. The process allows Cosi to continue normal business
operations during the Bankruptcy Court supervised sale
process.
“We worked very hard to avoid this step,” said Mark Demilio,
Cosi’s Chairman of the Board. “With the advice and support of
outside advisors, we’ve explored multiple paths, including raising
capital through equity and/or debt in either public or private
transactions, selling the Company outside the bankruptcy process,
selling certain assets of the Company, and other transactions to
restructure the balance sheet or raise capital, while also focusing
on attempting to improve sales, reduce costs, and exit
underperforming locations. It’s become clear that, despite
the extensive efforts by the Company, no such transactions are
achievable at this time, that the Company cannot continue to
operate in its current financial condition, and that the best
alternative for the Company and its creditors would be to
accomplish a sale through the bankruptcy process.”
Prior to the Chapter 11 filing, the Company closed 29 of its 74
Company-owned restaurants. The 31 franchised locations are
unaffected. The plan outlines a fast-track process that will allow
Cosi to emerge from the restructuring under new ownership and with
an improved financial position and stronger brand.
“This was a difficult step, but it was necessary to address our
liquidity issues," said Patrick Bennett, Sr., interim CEO of Cosi,
Inc. “Cosi’s core business and franchise base remain intact,
and we filed with the liquidity resources necessary to carry out
the restructuring plan. We believe this process will allow
the Company to right-size its balance sheet, reduce its debt, and
focus on improving the business and stabilizing the brand,” Bennett
stated.
Court filings and other information related to the restructuring
proceedings are available on the Company’s website at
www.getcosi.com.
Mirick, O’Connell, DeMallie & Loungee, LLP is serving as
legal counsel, and the Company will appoint a Chief Restructuring
Officer within 7-10 days. Patrick Bennett continues to serve as
interim CEO, and Edward Schatz of The O’Connor Group, Inc.
continues to serve as interim CFO.
About Così, Inc.
Così (http://www.getcosi.com) is an international fast casual
restaurant company. At the heart of every Cosi® restaurant is
an open-flame stone-hearth oven where the Così® signature flatbread
is made from scratch throughout the day. The flatbread is
made from a generations-old recipe and is part of many Così®
favorites. Così® was founded on the idea that good-for-you food
should be delicious. Menu items are made using fresh
ingredients and distinctive sauces and spreads to create edgy
flavors. The menu features made-to-order sandwiches,
hand-tossed salads, bowls, breakfast wraps, melts, all natural
soups, signature Squagels®, artisan flatbread pizzas, S`mores,
snacks and desserts. Guests can also enjoy handcrafted
beverages and a variety of coffee-based and specialty
beverages.
Così® employees create a welcoming environment
where guests are invited to relax and enjoy great food. In
many cases, Così® is the cornerstone of the communities that they
are in and take pride in supporting community organizations and
local charities. There are currently 45 Company-owned and 31
franchise restaurants operating in fourteen states, the District of
Columbia, Costa Rica and the United Arab Emirates.
"Così," "(Sun & Moon Design)" and related marks are
registered trademarks of Così, Inc. in the U.S.A. and certain other
countries. Copyright © 2016 Così, Inc. All rights reserved.
"SAFE HARBOR" STATEMENT UNDER THE PRIVATE SECURITIES LITIGATION
REFORM ACT OF 1995. This press release contains statements that
constitute forward- looking statements under the federal securities
laws. Forward-looking statements are statements about future events
and expectations and not statements of historical fact. The words
"believe," "may," "will," "should," "anticipate," "estimate,"
"expect," "intend," "objective," "seek," "plan," "strive," or
similar words, or negatives of these words, identify forward-
looking statements. We qualify any forward-looking statements
entirely by these cautionary factors. Forward-looking statements
are based on management's beliefs, assumptions and expectations of
our future economic performance, taking into account the
information currently available to management. Forward-looking
statements involve risks and uncertainties that may cause our
actual results, performance or financial condition to differ
materially from the expectations of future results, performance or
financial condition we express or imply in any forward-looking
statements. Factors that could contribute to these differences
include, but are not limited to: the results being reported in this
release are unaudited and subject to change; the cost of our
principal food products and supply and delivery shortages and
interruptions; labor shortages or increased labor costs; changes in
demographic trends and consumer tastes and preferences, including
changes resulting from concerns over nutritional or safety aspects
of beef, poultry, produce, or other foods or the effects of
food-borne illnesses, such as E. coli, "mad cow disease" and avian
influenza or "bird flu"; competition in our markets, both in our
business and in locating suitable restaurant sites; our operation
and execution in new and existing markets; expansion into new
markets including foreign markets; our ability to attract and
retain qualified franchisees and our franchisees' ability to open
restaurants on a timely basis; our ability to locate suitable
restaurant sites in new and existing markets and negotiate
acceptable lease terms; the rate of our internal growth and our
ability to generate increased revenue from our existing
restaurants; our ability to generate positive cash flow from
existing and new restaurants; fluctuations in our quarterly results
due to seasonality; increased government regulation and our ability
to secure required government approvals and permits; our ability to
create customer awareness of our restaurants in new markets; the
reliability of our customer and market studies; cost effective and
timely planning, design and build out of restaurants; our ability
to recruit, train and retain qualified corporate and restaurant
personnel and management; market saturation due to new restaurant
openings; inadequate protection of our intellectual property; our
ability to obtain additional capital and financing, including
debtor-in-possession (DIP) financing; our success in restructuring
the Company; our success in finding a purchaser of our assets;
adverse weather conditions which impact customer traffic at our
restaurants; and adverse economic conditions.
Further information regarding factors that could affect our
results and the statements made herein are included in our filings
with the Securities and Exchange Commission.
Additional information is available on Così's
website at http://www.getcosi.com in the investor relations
section.
CONTACT:
nikki@nikkirichardson.com
CO / Greenough
978.256.1651