Sbarro plans bankuptcy exit strategy

Aug. 10, 2011

Sbarro Inc. entered bankruptcy this year but has proposed a restructuring plan that would give ownership of the company to senior lenders.

Under the terms of the proposed plan, Sbarro expects to reduce its debt by approximately 73 percent, or $295 million, from about $405 million to $110 million, plus any amounts funded under a new money term loan facility.

Upon emergence from the Chapter 11 process, Sbarro’s prepetition first lien lenders would own substantially all of the company’s equity. First lien lenders have also committed, subject to the satisfaction of certain conditions, to provide Sbarro with an $18.6 million new-money term loan facility to be used for general corporate and working capital needs following emergence. It will provide the company with sufficient liquidity at emergence. In addition, the company expects to generate additional cash from operations through the end of the year.

A Sept. 7 hearing to consider approval is set.

“The plan gives us a clear path to emerge from the bankruptcy process with significantly reduced debt and increased financial flexibility and liquidity,” said Nicholas McGrane, interim president and CEO of Sbarro. “Sbarro continues to perform well, experiencing positive same store sales and outpacing mall traffic in the first half of 2011.”

He said despite a challenging economic environment, Sbarro remains a strong company with one of the most recognizable restaurant brands in the world.

“As we seek to implement our balance sheet restructuring, Sbarro’s restaurants will continue to operate in the normal course and without interruption and will be positioned to compete more effectively going forward,” McGrane said.

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Topics: Financial Management, Financing and capital improvements, Operations Management

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