Romano's Macaroni Grill to Explore Sale Under Bankruptcy Protection
October 19 2017 - 7:23PM
Dow Jones News
By Lillian Rizzo
The operator of casual Italian dining chain Romano's Macaroni
Grill is exploring a sale of the chain despite having a
debt-restructuring deal already negotiated.
The chain's parent company and a handful of its affiliates,
including investment vehicle Mac Acquisition LLC, sought chapter 11
protection Wednesday after negotiating a restructuring pact that
has the support of the company's largest secured creditors, Bank of
Colorado and Dean Riesen's Riesen Funding LLC, court papers
show.
Romano's owes more than $23 million in secured debt collectively
to Bank of Colorado and Riesen Funding. The company hopes to win
the support of other secured creditors, as well as unsecured
creditors, during its first few weeks under bankruptcy protection,
according to court papers.
"A reorganization under the proposed plan allows the debtors to
maintain operations, preserve approximately 4,600 jobs and assume
most of its leases and contracts," Chief Executive Nishant Machado
said in court papers filed Wednesday.
However, company attorney Jeffrey Krause said in court Thursday
that while Romano's believes this deal offers the best outcome for
unsecured creditors, the company will explore every option.
The company and its advisers are interviewing investment banks
and hope to retain one by next week, Mr. Krause said at the
hearing. The investment bank will then "run a parallel process" to
see if a buyer could offer better recoveries for the creditors than
the current plan.
Romano's aims to file its reorganization plan in the next week,
Mr. Krause added.
As part of the plan, Raven Capital Management has agreed to
provide the chain with a $5 million bankruptcy loan to fund
operations while under chapter 11 protection. On Thursday, Judge
Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del.,
signed off on the company's use of up to $3 million of the
loan.
The company is scheduled to appear before Judge Walrath on Nov.
13 to seek approval to use the rest of the bankruptcy loan.
Romano's closed 37 unprofitable restaurants so far this year.
The chain owns 93 restaurants in 23 states and brought in revenue
of about $230 million last year.
Since RedRock Partners LLC acquired the chain for $8 million in
2015, Romano's has struggled to handle its debt, Mr. Machado said
in court papers.
Like many of its peers, the company blamed its financial woes on
the downturn in the casual dining industry as customers have
shifted to cheaper, faster alternatives. In recent years, the
restaurant sector has been plagued by increased competition,
stemming from chains opening too many locations, in addition to
decreasing sales and tightened liquidity positions.
Romano's Macaroni Grill joins recent restaurant bankruptcy
filings, including soup and sandwich chain Cosi Inc.; steakhouse
chain Logan's Roadhouse; and Ignite Restaurant Group, the operator
of Joe's Crab Shack and Brick House Tavern + Tap.
Patrick Fitzgerald contributed to this article.
Write to Lillian Rizzo at Lillian.Rizzo@wsj.com
(END) Dow Jones Newswires
October 19, 2017 19:08 ET (23:08 GMT)
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