Buffets, Inc., on Wednesday filed for Chapter 11 bankruptcy protection-a move that comes four years after its first bankruptcy filing.
In addition to filing for bankruptcy with all of its subsidiaries, the Eagan-based restaurant chain also filed a proposed plan of reorganization with the U.S. Bankruptcy Court in Delaware.
Buffets operates restaurants under brands that include Old Country Buffet, HomeTown Buffet, Ryan's, and Fire Mountain. Its restructuring plan includes eliminating virtually all of the company's roughly $245 million of outstanding debt, plus interest payments of more than $30 million. It also calls for the closure of 81 "underperforming" restaurants-which represent about 16 percent of the 494 that the company operates in 38 states nationwide. The locations weren't disclosed in the filing, but the Pioneer Press reported that they are expected to become public this week.
"The decision to close these underperforming restaurants, though difficult, resulted from a comprehensive, store-by-store analysis of financial performance, occupancy costs, market conditions, and the long-term strategy of our reorganized restaurant portfolio," Buffets CEO Mike Andrews said in a statement.
In addition to closing some restaurants, Buffets said that is also looking for "more favorable" lease arrangements with landlords at others, adding: "To the extent those leases cannot be modified on acceptable terms, additional restaurant closings may be required."
Buffets said that its restructuring plan was negotiated with and received full support from lenders who hold 83 percent of the company's senior debt. The company negotiated a $50 million debtor-in-possession loan from its lender base, which is expected to help it handle operating costs during the restructuring process.
The restructuring plan calls for the company's existing lenders to receive 100 percent of Buffets' new common stock upon its emergence from bankruptcy.
The company said that it expects to complete the restructuring process and exit bankruptcy protection within about six months.
In January 2008, Buffets filed for reorganization under Chapter 11 bankruptcy protection. According to the Pioneer Press, it had 626 restaurants and 37,000 employees at the time. The company exited from bankruptcy in April 2009, saying that it had emerged with "a stronger balance sheet, significantly less debt, and greater resources to improve operations and make investments in our business."
Buffets said in May that it was exploring options to handle its debt. Buffets spokeswoman Melissa Sheer told the Pioneer Press that "it's been a challenging time for the restaurant industry," adding that consumers have been holding on to their discretionary income, and the economic recovery that the company had hoped for over the past few years has been weak.
Buffets is among Minnesota's 20-largest privately held companies based on revenue, which is estimated to have totaled $1.15 billion during its last fiscal year. According to the Pioneer Press, it currently employs about 28,000.