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May 26, 2020 – The Debtors requested Court authority for a $25.5mn private sale of "at least" 45 of the Debtors’ restaurant locations to GPEE Lender, LLC (the “Purchaser”) [Docket No. 241]. The Purchaser is an entity created by (i) GP Investments, Ltd. (“GP”), which is the ultimate owner of each of the Debtors, and (ii) Earl Enterprises (“EE”) which indirectly owns and operates over 200 restaurant locations under brands including Planet Hollywood, Bucca di Beppo, Bertuccis, and Earl of Sandwich. The $25.5mn purchase price is comprised mostly of prepetition debt purchased by PHL Holdings, LLC (“PHL,” another entity jointly owned by GP and EE) from Garrison Loan Agency Service and City National Bank (the “Prepetition Secured Debt”). PHL is in position to credit bid up to $40.0mn ($30.0mn of the Prepetition Secured Debt and $10.0mn of DIP financing) for the Debtors' assets, a fact that, together with the involvement of insider GP in the Purchaser's bid, may have dissuaded two other potential purchasers from further pursuing an acquisition. The Debtors' motion comments: "After Purchaser was approved to extend the DIP Loan, neither party has continued due diligence and, upon information and belief, neither entity has a continuing interest in purchasing the Debtors’ assets."
The Debtors' motion also adds that further to the recent rejection of 48 leases, they have "Fifty-Three (53), nonrejected leases subject to potential assumption and assignment pursuant to the sale."
The Debtors' motion provides: "The Debtors began an informal sale process shortly before Petition Date by reaching out to potential strategic partners to gage interest in sale or merger opportunities. However, due to the Pandemic and shut down of almost all businesses nationwide, there was little interest in acquisition of a restaurant business. Shortly prior to Petition Date, Debtors started negotiations with various entities generally referred to as Earl Enterprises ('EE') which, through separate entities, own and operate over 200 restaurant locations under brands including Planet Hollywood, Bucca di Beppo, Bertuccis, and Earl of Sandwich. Debtors and EE negotiated preliminary terms of a management agreement and Debtor in Possession Loan ('DIP Loan') based upon the assumption that any sale transaction would need to run through a chapter 11 process.
After the Petition Date, Debtors sought approval to enter the management agreement and obtain the DIP Loan and, while seeking Court approval, Debtors considered offers from at least two (2) other parties in respect of both management and the DIP Loan. Debtors created a data room that was made available to all interested parties with the understanding that party chosen as the ultimate manager and lender under the DIP Loan would be the likely purchaser of Debtors’ assets. Ultimately, the Debtors received Court approval to enter the management agreement and obtain the DIP Loan from entities affiliated with EE.
After Purchaser was approved to extend the DIP Loan, neither party has continued due diligence and, upon information and belief, neither entity has a continuing interest in purchasing the Debtors’ assets. As such, the Debtors determined it was in the best interest of creditors and the estates to enter into the Purchase Agreement with GPEE Lender, LLC and/or one or more of its affiliates (collectively, the “Purchaser”), for the sale of the assets, subject to higher and better bids that may be submitted prior to the sale hearing.
The Debtors originally contemplated seeking approval of bid procedures and conducting a formal auction. However, after consultation with the Committee, and in the exercise of business judgment, Debtors believe the cost and time related to a formal auction is highly unlikely to produce a bidder willing to extend funds beyond the Credit Bid and the most efficient and effective path is to pursue a private sale (still subject to a higher and better offer) to Purchaser. Debtors believe that entry into the Purchase Agreement with Purchaser is the best course of action because the contemplated transaction: (a) eliminates all existing secured debt; (b) leaves the estate with a lien free asset worth approximately $1,000,000; (c) preserves hundreds of jobs of the Debtors’ employees, (d) allows dozens of the Debtors’ vendors and lease counterparties to have a customer or tenant, and (e) enables the Debtors to consummate a sale and wind down the remainder of their assets and estates.
As of Petition Date, Debtors were operating at 21 locations. Subsequent to filing Debtors have rejected Forty-Eight (48) of Restaurant locations and reopened at another seven (7) locations. Debtors have a total of Fifty-Three (53), nonrejected leases subject to potential assumption and assignment pursuant to the sale."
Key Terms of the APA (attached to the motion as Exhibit A)
- Purchase Price: $25.0mn credit bid, $50k in cash, plus the assumption of the Assumed Liabilities in the approximate aggregate amount of $4.5mn, which includes: (a) cure claims of executory contracts and unexpired leases, (b) post-petition accounts payable, (c) unpaid payroll that comes due and payable after the closing (even if it relates to the pre-closing period), (d) accrued but unused paid time off for restaurant employees, (e) certain accrued taxes, (f) customer program liabilities (i.e., gift cards and “Loyalty” program), (g) real estate restructuring fees, and (h) transfer taxes.
- Break-Up Fee and Expense Reimbursement: None
About the Debtors
According to the Debtors: “FoodFirst Global Restaurants is the proud parent company for two of America's most popular Italian restaurant brands. As a private company, we are in a strong position to refresh these brands, expand the number of locations in the future and invest in the long term profitable growth of our company going forward.
FoodFirst Global Restaurants was formed in 2018 by leading investment firm GP Investments, Ltd and a group of talented entrepreneurial investors. At FoodFirst Global Restaurants, we are relentlessly focused on the quality of our food and ensuring our guests have a consistently outstanding experience. We accomplish that by driving a world class culture with our people who care deeply about our Mission and live our Values."
On April 10, 2020, FirstFood Global Restaurants and seven affiliated Debtors (“FirstFood” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the Middle District of Florida, lead case number 20-02159. At filing, the Debtors, the parent company of the BRAVO! Cucina Italiana and BRIO Tuscan Grille restaurant groups, notedestimated assets between $10.mn and $50.mn; and estimated liabilities between $10.0mn and $50.0mn.
In May 2018, Bravo Brio Restaurant Group, Inc. (then NASDAQ: BBRG) was acquired via merger by Spice Private Equity Ltd. (listed on the SIX Swiss Exchange (SPCE)), a Swiss affiliate of Hamilton, Bermuda based private equity group GP Investments, Ltd. and renamed FoodFirst Global Restaurants. In a press release announcing the acquisition, GP Investments advised that the they had paid approximately $100.0mn to acquire Bravo Brio’s equity.
In late March of this year, the Debtors announced that they were temporarily closing 71 of its 92 locations in the U.S. due to the COVID-19 crisis; with the balance reduced to serving a limited carryout menu and run by skeletal staffs. At the time, the Debtors furloughed 6,000 workers but warned that if the COVID-19 virus continued, things would get worse. That has now happened.
"The mandated dining room closure orders wiped out 60% of our restaurants within days and since then we have experienced nothing short of devastating sales declines," the Debtors’ recently hired CEO Steven Layt (formerly CEO at NPC International’s Pizza Hut operations) said in a statement.
The COVID-19 outbreak could not have come at a worse time for the company continued Layt in an interview describing his efforts to put the final touches on a turnaround plan for the company that involved renegotiating leases with landlords where rents were too high; re-evaluating the menus at both brands; optimizing the supply chain; and simplifying kitchen operations.
“Everyone was feeling bullish about the future,” he said. “Then the rug got pulled.”
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