Sbarro Proves Bankruptcy Works

PizzaSbarro, the popular pizza chain, filed Chapter 11 bankruptcy three months ago and has shown that the process can work. The company’s pre-packaged Chapter 11 plan, which reduces Sbarro’s debt by approximately 85%, has been approved and it took effect on June 2, 2014.

Sbarro will be moving its company headquarters from Melville, New York, to Columbus, Ohio. This will allow Sbarro to reduce its expenses and it also means its headquarters will be closer to its new fast-casual Pizza Cucinova concept, where the customer can create personal pizzas cooked in a wood-fired oven. The concept was launched last year and there are locations already in Ohio. The move will also result in Sbarro cutting nearly 40 employees at its old location, but the company’s other 2,700 employees across the country will keep their jobs.

Sbarro’s financial troubles were attributed in large part to the severe decrease of mall traffic and decline in food court sales. The pizza company had closed more than 100 of its stores in North America prior to seeking bankruptcy protection, which saved it millions of dollars per year.

Although Sbarro sought a buyer who would make an offer that was better than the debt for equity deal offered by the company’s lenders, it received no bids. Thus, Sbarro moved forward with its pre-packaged Chapter 11 plan. Sbarro’s plan of repayment provides that lenders, including investors Apollo Global Management, Babson Capital Management LLC and Guggenheim Investment Management LLC, will exchange $148 million in debt for control of the new business. Vendors, landlords and other unsecured creditors will have an estimated $1.25 million to share under the plan.

“We want to thank our stakeholders for their steadfast support,” the company said in a statement. “The company now can move forward with its plans to invest in and grow the business. We will be announcing progress and further plans for the business in the near future.”

If you have questions regarding the Chapter 11 process or how it could benefit your company, contact us for a free consultation.

 

 

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