This Day On The Street
Continue to site
ADVERTISEMENT
This account is pending registration confirmation. Please click on the link within the confirmation email previously sent you to complete registration.
Need a new registration confirmation email? Click here

Sbarro Wins Approval For Chapter 11 Financing

NEW YORK (The Deal) -- Pizza chain Sbarro has won interim approval to use cash collateral and $20 million in debtor-in-possession financing as it aims to confirm a prepackaged reorganization plan.

Judge Martin Glenn of the U.S. Bankruptcy Court for the Southern District of New York in Manhattan on Wednesday, March 12, issued an order approving the financing motion and set a final cash and DIP hearing for April 7. Glenn also scheduled an April 25 combined hearing to consider approval of the company's disclosure statement and confirmation of the plan.

Lenders holding 98% of the company's debt voted in favor of the plan, and certain lenders are providing the DIP, which would mature on the earliest of six months from the closing date, on consummation of a sale, on the effective date of a plan or 35 days following the interim order if there were no final order. The debtor would have the option, for a 0.75% fee, to extend the term of the DIP three months.

The financing accrues interest at either Libor plus 8%, with a Libor floor of 2%, or a base rate plus 7%, with a floor of 3%. It carries a 1.5% underwriting fee and a 2% original issue discount.

The Melville, N.Y., debtor filed for Chapter 11 on Monday, calling its debt "unsustainable."

Under the plan, first-out term lenders owed $61.3 million on a Nov. 28, 2011, credit agreement would credit-bid $35 million for substantially all the company's equity. Second-out term lenders owed $86.9 million would receive 2% of shares.

General unsecured creditors and equity holders would be wiped out.

Under proposed bidding procedures, rival restructuring proposals would have to pay off the DIP, administrative claims, at least $35 million in lender claims and wind-down costs and provide another $500,000. Offers would be due May 9 with a $5 million deposit.

An auction would be held on May 14 if Sbarro received a competing offer.

Glenn has not set a hearing on the bid procedures motion.

Sbarro, a staple of mall food courts, was founded in Brooklyn, N.Y., in 1956. It previously filed for Chapter 11 on April 4, 2011. It exited on Nov. 16, 2011, with a plan that swapped $172.7 million in first-lien debt for a $75 million last-out exit term loan plus all the reorganized Sbarro's equity. Certain first-lien lenders also provided rollover and new-money term loans totaling $70 million.

Equity holders led by private equity firm MidOcean Partners LP were wiped out.

Despite the restructuring, which eliminated roughly $270 million in debt, Sbarro said reduced mall traffic resulted in Ebitda dropping from about $30 million in 2011 to $15 million in 2012 and less than $4 million in 2013, far below the projected $30.2 million for 2012 and roughly $36 million in 2013.

James H.M. Sprayregen, Edward O. Sassower, Nicole L. Greenblatt and David S. Meyer of Kirkland & Ellis LLP are debtor counsel. Adam Keil, Tarik Rguem, Usman Saleem and Jonathan Tenan of Moelis & Co. LLC are Sbarro's investment bankers.

Evan R. Fleck and Brian Sturm of Milbank, Tweed, Hadley & McCloy LLP represent DIP and prepetition agent Cantor Fitzgerald Securities.

Check Out Our Best Services for Investors

Action Alerts PLUS

Portfolio Manager Jim Cramer and Director of Research Jack Mohr reveal their investment tactics while giving advanced notice before every trade.

Product Features:
  • $2.5+ million portfolio
  • Large-cap and dividend focus
  • Intraday trade alerts from Cramer
Quant Ratings

Access the tool that DOMINATES the Russell 2000 and the S&P 500.

Product Features:
  • Buy, hold, or sell recommendations for over 4,300 stocks
  • Unlimited research reports on your favorite stocks
  • A custom stock screener
Stocks Under $10

David Peltier uncovers low dollar stocks with serious upside potential that are flying under Wall Street's radar.

Product Features:
  • Model portfolio
  • Stocks trading below $10
  • Intraday trade alerts
14-Days Free
Only $9.95
14-Days Free
To begin commenting right away, you can log in below using your Disqus, Facebook, Twitter, OpenID or Yahoo login credentials. Alternatively, you can post a comment as a "guest" just by entering an email address. Your use of the commenting tool is subject to multiple terms of service/use and privacy policies - see here for more details.
Submit an article to us!
SYM TRADE IT LAST %CHG
AAPL $127.60 2.28%
FB $83.09 2.87%
GOOG $535.38 2.16%
TSLA $205.27 -0.74%
YHOO $44.66 0.46%

Markets

DOW 18,034.93 +208.63 1.17%
S&P 500 2,100.40 +19.22 0.92%
NASDAQ 4,994.6020 +62.7870 1.27%

Partners Compare Online Brokers

Free Reports

Top Rated Stocks Top Rated Funds Top Rated ETFs