New Chapter 11 Bankruptcy Filing - American Blue Ribbon Holdings LLC

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American Blue Ribbon Holdings LLC

January 27, 2020

Man. The restaurant space is active AF when it comes to BK filings these days. Sysco Corporation ($SYY) must be sweating bullets. On the same day that BL Restaurants Holding LLC (Bar Louie) filed for bankruptcy and a mere week after The Krystal Company filed and less than six months after industry segment brother Perkins and Marie Callender’s filed for bankruptcy, Tennessee-based American Blue Ribbon Holdings LLC and four affiliated entities — the operators of 75 Village Inn and 22 Bakers Square family dining restaurant brands — filed for bankruptcy in the District of Delaware — the 8th significant bankruptcy filing in Delaware in 2020 (far outpacing any other jurisdiction).

This filing may come as a surprise to some. Why? Well, this August 2019 article in the Nashville Post dripped with optimism about the company’s proposed turnaround — a turnaround which included 50 pre-petition store closures. Despite these efforts, the debtors revenues were only $318mm in ‘19, a decline of $36mm.

Unlike BL Restaurants Holding LLC (Bar Louie), the debtors aren’t drowning in funded debt. In fact, they don’t have any secured debt at all. Unsecured claims total only $14mm.

They are, however, drowning due to industry-wide issues. If the factors leading to this filing sound familiar, well…they are:

  • Increased competition in the restaurant business. ✅

  • Increased competition from grocery stores’ expanded prepared meai offerings which, by and large, represent a much better value proposition. ✅

  • Rising labor costs ($2mm hit). ✅

  • Above-market rent. ✅

  • Declining foot traffic due to “an increase in convenience via takeout and delivery at the expense of dine-in customers at restaurants.” DISRUPTION!! ✅

  • Over-expansion. ✅

For all of these reasons, the debtors have been bleeding cash. They lost $11mm in ‘18 and $7mm in ‘19. So, sure, the turnaround was taking hold, it seems, but the $4mm in savings weren’t enough. Indeed, the debtors’ filing was precipitated due to a lack of liquidity.

The debtors will use the “breathing spell” provided by the filing to access $20mm in emergency liquidity (from their indirect ultimate majority owner, Cannae Holdings Inc. ($CNNE)) and pursue strategic options (without a banker….uh…ok, sure).

  • Jurisdiction: D. of Delaware (Judge Silverstein)

  • Capital Structure: N/A

  • Professionals:

    • Legal: KTBS Law LLP (Michael Tuchin, David Fidler, Jonathan Weiss, Sasha Gurvitz) & Young Conaway Stargatt & Taylor LLP (Robert Poppiti Jr.)

    • Claims Agent: Epiq Bankruptcy Solutions LLC (*click on the link above for free docket access)

  • Other Parties in Interest: