December 14, 2020 – The Debtors filed a Second Amended Prepackaged Plan of Reorganization, with a separate blackline showing changes to the version filed on November 20, 2020 [Docket Nos. 278 and 279 respectively].

The modification reflects an amendment to a Claims Cash Pool (detailed below). The cash pool gives holders of general unsecured claims, who are otherwise slated to receive no recovery under the Plan, a source of distribution if they sign a release opt-in.

Overview of the Plan

The Plan implements a prepackaged restructuring agreed to among the Debtors and the Debtors’ major stakeholders, including the “Consenting Secured Lenders” [i.e., holders of more than 66.6% of the aggregate amount of all outstanding Loan Claims] and the Investor. The restructuring will result in a deleveraging of the Debtors’ capital structure, as reflected in the chart below:

This amount includes: (i) $37.0 million in accordance with treatment of Class 3 Secured Loan Claims under the Plan; (ii) $8.0 million in DIP Claims to be converted on a dollar-for-dollar basis into loans under the Exit Facility; and (iii) an additional $7.0 million in available liquidity.

The Disclosure Statement [Docket No. 15] provides: “The anticipated benefits of the Plan include, without limitation, the following:

• (a) Conversion of approximately $55.0 million of Secured Loan Claims to equity and an exit facility;
• (b) Treatment of approximately $18.0 million of Secured Lender Deficiency Claims as General Unsecured Claims under the Plan; 
• (c) A $8.0 million DIP Facility from the DIP Lenders; and 
• (d) Prompt emergence from chapter 11.

The Plan provides for a comprehensive restructuring of the Debtors’ prepetition obligations, preserves the going-concern value of the Debtors’ business, maximizes all creditor recoveries and protects the jobs of the Debtors’ invaluable employees, including Management. As described in further detail below, under the terms of the Plan, among other things, each Holder of Secured Loan Claims will receive, on account of their Secured Loan Claims, a Pro-Rata Share of (A) a portion of the Exit Facility (after accounting for the Exit Conversion Amount) in a principal amount equal to $37.0 million and (B) the Reorganized Equity Interests.”

The following is a summary of classes, claims, voting rights and expected recoveries (defined terms are as defined in the Plan and/or Disclosure Statement, see also the Liquidation Analysis below)

• Class 1 (“Other Priority Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Holders will be paid in full in cash.
• Class 2 (“Other Secured Claims”) is unimpaired, deemed to accept and not entitled to vote on the Plan. Holders will be paid in full in cash.
• Class 3 (“Secured Loan Claims”) is impaired and entitled to vote on the Plan. Recovery is 100%. Each Holder shall receive a Pro-Rata Share of: (A) a portion of the Exit Facility (after accounting for the Exit Conversion Amount) in a principal amount equal to $37.0mn and (B) the Reorganized Equity Interests.
• Class 4 (“General Unsecured Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Recovery is 0%. Holders of General Unsecured Claims will not receive any distribution on account of such General Unsecured Claims. However, those who sign and return the opt-in in respect of releases will get their pro rata share of a claims cash pool, provided that no holder of a General Unsecured Claim will be entitled to receive more than 18% of the amount of their claim.
• Class 5 (“Intercompany Claims”) is unimpaired/impaired, deemed to accept/reject and not entitled to vote on the Plan. Recovery is 100%/0%.
• Class 6 (“Subordinated Claims”) is impaired, deemed to reject and not entitled to vote on the Plan. Recovery is 0%.
• Class 7 (“Equity Interests in Holdings”) is impaired, deemed to reject and not entitled to vote on the Plan. Recovery is 0%.
• Class 8 (“Intercompany Equity Interests”) is impaired, deemed to reject and not entitled to vote on the Plan. Recovery is 0%.

Amended Claims Cash Pool and Release Opt-In [Docket No. 278]

The new Section 4.11 of the Second Amended Plan provides: “Claims Cash Pool and Release Opt-In. On the Effective Date, the Debtors or Reorganized Debtors shall establish and fund the Claims Cash Pool Account…with the amounts to be determined under clauses (ii) and (iii) of the definition of 'Claims Cash Pool' to be initially established using the estimates provided in Section 2.3(c) pending the final allowance of the Professional Fee Claims, which amount shall be no less than $650,000. As soon as practicable following the final allowance of the Professional Fee Claims, the Debtors shall deposit any additional Cash in the amounts determined under clauses (ii) and (iii) of the definition of 'Claims Cash Pool' (if any) into the Claims Cash Pool Account from the portion of the Professional Fee Reserve Amount allocated to the Committee’s Professionals and the Debtors’ Professionals. In no event shall the amounts deposited into the Claims Cash Pool Account exceed $1,000,000.

Further, as soon as reasonably practicable after the occurrence of the Claims Objection Deadline and the final allowance of the Professional Fee Claims, the General Unsecured Claims Administrator shall distribute the funds in the Claims Cash Pool Account to Holders of Allowed General Unsecured Claims that elect to opt-in and be bound by the Releases set forth in Article IX of the Plan by appropriately completing and filing with the Notice and Claims Agent an Opt-In Proof of Claim Form on or before the General Unsecured Claims Bar Date. Any such Holders will be eligible to receive their Pro-Rata Share of the Claims Cash Pool (after deducting all fees and expenses incurred by the General Unsecured Claims Administrator) on account of their Allowed General Unsecured Claims; provided that no Holder of a General Unsecured Claim shall be entitled to receive more than 18% of the Allowed amount of its General Unsecured Claim….

After all distributions have been made to the Holders of General Unsecured Claims that timely deliver an Opt-In Proof of Claim Form, any and all Cash remaining in the Claims Cash Pool Account shall be indefeasibly paid to the Reorganized Debtors.”

The Second Amended Plan specifies that "Claims Cash Pool" means Cash, in amount equal to the lesser of (a) $1,000,000 and (b) the sum of (i) $650,000; plus (ii) the amount, if any, by which the aggregate amount of Allowed Professional Fee Claims of the Committee’s Professionals are less than $400,000; plus (iii) the amount, if any, by which the aggregate amount of Allowed Professional Fee Claims of the Debtors’ Professionals are less than $3,302,000; which Cash will fund the Claims Cash Pool Account and be distributed in accordance with the terms and conditions of the Plan.

Liquidation Analysis (see Exhibit B to Disclosure Statement [Docket No. 15] for notes)

The following documents were attached to the Disclosure Statement [Docket No. 15]:

• Exhibit A: Joint Prepackaged Chapter 11 Plan of Reorganization 
• Exhibit B: Liquidation Analysis 
• Exhibit C: Valuation Analysis
• Exhibit D: Financial Projections 
• Exhibit E: Corporate Organizational Chart

On December 14, 2020, the Debtors filed a Second Plan Supplement to their Second Amended Prepackaged Plan of Reorganization [Docket No. 280] and attached the following exhibit:

• Exhibit F: Supplement to the Assumed Executory Contracts and Unexpired Leases Schedule.

About the Debtors

The Kibler Declaration states: “The Debtors are operators and franchisors of approximately 170 limited service restaurants in California, Arizona and Nevada under the Rubio’s Coastal Grill concept. 

Ralph Rubio co-founded Rubio’s in 1983 after repeated trips to Mexico as a college student…. The first Rubio’s location was a walk-up stand in Mission Bay, San Diego….After tremendous growth in the late 1980s and 1990s, Rubio’s completed an initial public offering in May 1999, trading on the NASDAQ National Exchange under the ticker symbol “RUBO.” Ralph stepped down as CEO in 2001 but remained actively involved as head of the culinary team, co-founder and Chairman. In 2010, Mill Road Capital, L.P. (the “Investor”) acquired Rubio’s in a “take- private” transaction for $91 million.”

The Debtors employ more than 3,400 hourly and salaried employees at their restaurants and corporate offices located in Carlsbad, California.

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