On Monday, June 13, 2011, Perkins & Marie Callender's, Inc. ("Debtors"), filed chapter 11 petitions for bankruptcy in the United States Bankruptcy Court for the District of Delaware. According to the Declaration of Debtors' CEO in Support of its Chapter 11 Petitions (the "Declaration" or "Decl"), Debtors operate approximately 600 restaurants in North America. As the name suggests, Debtors operate two types of restaurants - the Perkins chain and the Marie Callender's chain. While the company owns many of the restaurants, the majority of stores are operated by franchisees. See Decl. at *4. A copy of Debtors' Declaration is available here for review.
Events Leading to Bankruptcy
Debtors describe themselves as "leading operators of family-dining and casual-dining restaurants." Decl. at *2. Many of Debtors stores are located in California and Florida - two of the states hit hardest by the recession over the last couple of years. High unemployment rates nationwide have lowered consumer discretionary income, which in turn has had a negative impact on Debtors' sales. Decl. at *7. Debtors also note that many of their stores, when compared to their competitors, have become "facially dated and stale," which limits the company's ability to maintain customer traffic. Id.
According to the Debtors, the company's trade debt totals approximately $8.6 million. A copy of Debtors' Petition for Bankruptcy is available here, wherein Debtors list their 40 largest unsecured creditors. Also in their Petition, Debtors list assets worth $289 million against total debts of $440 million. Debtors' debt include $132 million in senior secured notes that mature in 2013, $190 million in unsecured notes and a revolving credit agreement with a limit of $26 million.
First Steps in Bankruptcy
As is often the case in chapter 11 proceedings, the Debtors in this proceeding have filed certain "first day motions" wherein they seek relief from the Bankruptcy Court on an expedited basis. One of the motions that may be of interest to trade creditors is Debtors Motion for Authority to Pay Claims Arising Under 11 U.S.C. 503(b)(9) (the "Twenty Day Claims Motion" or "Motion"). Under the Twenty Day Claims Motion, Debtors seek authority from the Bankruptcy Court to pay pre-bankruptcy claims for vendors and suppliers who are entitled to administrative priority status under 11 U.S.C. 503(b)(9). According to the Debtors, such relief is essential to the company's operations as it will encourage vendors to continue providing post-bankruptcy trade credit going forward. Decl. at **27-28.
Debtors also filed a Motion to Reject Non-Residential Real Property Leases and Abandon Property (the "Motion to Reject"). According to the Debtors, prior to bankruptcy the company determined that certain stores were not profitable and should be closed. Debtors have determined that the "Closed Locations" are no longer beneficial to the bankruptcy estates and that the Court should authorize Debtors to reject the various leases.
This bankruptcy proceeding is before the Honorable Kevin Gross of the United States Bankruptcy Court for the District of Delaware. A copy of Judge Gross' Chamber Procedures are available here for review. Debtors are represented by the law firms Young Conaway Stargatt & Taylor, LLP and Troutman Sanders LLP.