RTI Holding Company, LLC – Ruby Tuesday Restaurant Group Files Chapter 11, Looks to Use Stay in Bankruptcy to Recover from COVID-19

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[Just filed. Developing Story] October 7, 2020 – Privately-held RTI Holding Company, LLC and 50 affiliated Debtors (dba Ruby Tuesday; “RTI” or the “Debtors”) filed for Chapter 11 protection with the U.S. Bankruptcy Court in the District of Delaware, lead case number 20-12456. The Debtors, owners and franchisors of the Ruby Tuesday brand restaurants, are represented by James E. O’Neill of Pachulski Stang Ziehl & Jones LLP. Further board-authorized engagements include (i) CR3 Partners, LLC as financial advisors, (ii) FocalPoint Securities, LLC  as investment banker, (iii) Hilco Real Estate, LLC, as lease restructuring advisor and (iv) Epiq Corporate Restructuring as claims agent. 

The Debtors’ lead petition notes between 1 and 50 creditors; estimated assets between $100.0mn and $500.0mn; and estimated liabilities between $100.0mn and $500.0mn. Documents filed with the Court list the Debtors’ three largest unsecured creditors as (i) National Retail Properties ($11.6mn rent claim, (ii) ZionsBancorporation, N.A ($10.0mn PPP loan claim) and (iii) Quadre Investments L.P. ($8.4mn disputed litigation claim).

In December 2017, NRD Capital completed its acquisition of the then publicly traded Debtors (NYSE: RT) in a transaction valued at $335.0mn. In connection with the transaction, the Debtors (i) entered into a new credit facility for a secured term loan in the amount of $115.0mn and a new $12.5mn secured revolving credit facility; and (ii) provided notice of an optional redemption to the holders of its 7.625% Senior Notes due 2020 pursuant to which the Company had elected to redeem $212.5mn in principal amount of the outstanding Notes. 

At the time of the acquisition, the Debtors had 596 Ruby Tuesday restaurants (541 owned and 55 franchised), but those number have apparently dropped considerably in recent months, with reports suggesting that the Debtors have "quietly closed" 150 locations during 2020.

NRD Capital was founded by Former Popeyes, Domino’s and Checkers franchisee Aziz Hashim in 2014 and also own Fuzzy’s Taco Shop and Frisch’s Big Boy.

In a press release announcing the filing, the Debtors advised that: “Prior to its filing, the Company reached an understanding with its secured lenders to support its restructuring through financing and an agreement regarding the terms of a plan that will provide a sustainable path forward for the restaurant chain. The casual dining favorite plans to use this filing to strengthen its business by reducing liabilities and emerge a stronger organization built for the future. The Company intends to move through the bankruptcy process as quickly as possible. Its restaurants will continue to operate 'business as usual' throughout the reorganization process.”

Shawn Lederman, Ruby Tuesday’s CEO, commented" “This announcement does not mean ‘Goodbye, Ruby Tuesday’. Today’s actions will allow us an opportunity to reposition the company for long-term stability as we recover from the unprecedented impact of COVID-19….Our restructuring demonstrates a commitment to Ruby Tuesday’s future viability as we work to preserve thousands of team member jobs."

Notwithstanding the "understanding" with secured lenders referred to in the press release, board minutes filed with the Debtors' lead Petition do not reference any immediately anticipated debtor-in-possession ("DIP") financing or any formalized stakeholder support.

About the Debtors

According to the Debtors: “Founded in 1972 in Knoxville, Tennessee, Ruby Tuesday, Inc., is dedicated to delighting guests with exceptional casual dining experiences that offer uncompromising quality paired with passionate service every time they visit. From signature handcrafted burgers to the farm-grown goodness of the Endless Garden Bar, Ruby Tuesday is proud of its long-standing history as an American classic and international favorite for nearly 50 years. The Company currently owns, operates and franchises casual dining restaurants in the United States, Guam, and five foreign countries under the Ruby Tuesday® brand. 

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