Taco Bueno Restaurants – Plan and Disclosure Statement Filed, Attached Exhibits Include Valuation Analysis, Liquidation Analysis and RSA

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November 7, 2018 – Taco Bueno Restaurants filed a Chapter 11 Plan [Docket No. 21] and related Disclosure Statement [Docket No. 22]. The Disclosure Statement notes, “On October 24, 2018, the Initial Lender Group agreed to terms with Taco Supremo, LLC (‘Taco Supremo’), an affiliate of Sun Holdings, Inc. (‘Sun Holdings’), for the sale of 100 percent of its secured debt, which was the highest and best offer available at the debt auction in accordance with the bid instructions. The Initial Lender Group, holding in excess of $130 million in secured debt, made an informed decision to agree to the sale in order to receive a certain recovery in a highly distressed situation, and is supportive of the restructuring contemplated in the Chapter 11 Cases. In addition to acquiring all of the Company’s funded secured debt under the Prepetition Credit Agreement (as defined herein), Taco Supremo agreed in writing to execute the Restructuring Support Agreement dated November 6, 2018 (the ‘Restructuring Support Agreement’) providing terms and milestones for its support of a comprehensive restructuring transaction (the ‘Restructuring’) as embodied in the Plan that will convert all of Taco Bueno’s funded debt into equity, thereby right-sizing the Company’s balance sheet and positioning it for growth and to better compete in the competitive Tex-Mex QSR sector.
As the new money DIP lender and the largest secured lender, Taco Supremo seeks to convert its DIP and secured lender claims into 100 percent equity in the reorganized Company via a confirmed Plan. Taco Supremo intends to work with the Company to use an accelerated chapter 11 process to right-size the lease footprint and compromise certain liabilities while satisfying all administrative and priority Claims. The Company explored whether Taco Supremo would be interested in conducting an out-of-court transition of ownership, but Taco Supremo indicated that it preferred to pursue such a transaction and provide the necessary financing through a chapter 11 process. In doing so, Taco Bueno is positioned to preserve a valuable brand and continue providing a quality service for its loyal customers and jobs for thousands of local employees. Time is of the essence to ensure this objective is achieved. To that end, the Sponsor also fully supports the Restructuring contemplated by the Plan.
The Plan provides for a comprehensive restructuring of the Debtors’ approximately $130,912,500.00 in prepetition funded debt obligations under the Prepetition Credit Agreement. Substantially all of the Debtors’ assets are subject to valid and perfected Liens held by the Prepetition Lender, which require payment in full before other distributions can be made. The Plan reflects the reality that, based upon recent historical operating performance and cashflow projections, the Debtors’ enterprise value is significantly less than the amount of secured debt under the Prepetition Credit Agreement. The treatment of Class 3 – Prepetition Lender Secured Claims is the product of extensive negotiations between the Debtors and Taco Supremo as the Prepetition Lender. In developing the Plan, the Debtors gave due consideration to various factors developed in their sale process and other restructuring alternatives. After a careful review of their current operations and liquidity, prospects as an ongoing business, and estimated recoveries to creditors in a forced sale scenario given current market conditions, the Debtors concluded that they will maximize recoveries to their stakeholders by reorganizing as a going concern via the Restructuring embodied in the Plan. The Debtors believe that any alternative to confirmation of the Plan, such as liquidation, a partial sale of assets, or a sale of all or substantially all of their assets, would result in materially lower recoveries for stakeholders, significant delays, protracted litigation, and greater administrative costs. For these reasons, the Debtors believe that their business and assets have significant value that would not be realized in a forced sale or a liquidation, either in whole or in substantial part, and that the value of the Debtors’ estates is considerably greater as a going concern.”
The following exhibits were filed with the Disclosure Statement: 
  • Exhibit A – Plan of Reorganization 
  • Exhibit B – Corporate Structure Chart
  • Exhibit C – Liquidation Analysis 
  • Exhibit D – Valuation Analysis
  • Exhibit E – Restructuring Support Agreement

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