WILBRAHAM, Mass. ( TheStreet) -- Friendly's Ice Cream chain filed for bankruptcy on Wednesday, but will keep most of its restaurants open while closing a number of its weaker performing locations.
The company attributed its woes to rising commodity costs, particularly for cream, as well as high rents. Friendly's will keep 424 of its restaurants open, while closing 63 under-performing locations. Friendly's has around 10,000 employees across 15 states, and is well-known for its ice cream and burgers. Opened in Springfield, Mass. in 1935, the original founders sold the restaurant chain to Hershey ( HSY) in 1979; it was later sold in 1988 to Donald N. Smith. Friendly's began trading publicly in 1997 at $18 per share, and was then purchased by private equity firm Sun Capital Partners in 2007 for $395 million, or $15.50 a share.
In its Chapter 11 bankruptcy filing, Friendly's said it plans to seek a sale of itself in an auction with an affiliate of Sun Capital as the lead bidder. The auction is expected to take place in early December, and all bids will have to be submitted by Nov. 24. A minimum of $122.6 million in cash will be necessary to qualify as a bidder.
Sun Capital, which also invested in Real Mex Restaurants -- a Mexican chain that filed for bankruptcy on Tuesday -- will likely use Friendly's Chapter 11 filing as a chance to maintain the company's franchise business but also streamline operations through restaurant closings. Friendly's should be able to continue operating and meet its commitments during the restructuring having received a $70 million financing commitment, the company said. Its bankruptcy filing listed liabilities and assets of $100 million to $500 million. Its debt sits around $297 million. -- Written by Miriam Marcus Reimer in New York.
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