American Blue Ribbon Holdings, LLC (the "Company") reported it had filed a petition for voluntary Chapter 11 reorganization today with the U.S. Bankruptcy Court of Delaware. Once approved by the Court, this filing will allow the Company to continue operation of its businesses and service to its customers in the ordinary course while it works through the important elements of a plan of reorganization. The Company also noted it has arranged debtor-in-possession ("DIP") financing of $20 million from Cannae Holdings, Inc., its majority equity owner, in support of the filing and plan of reorganization.
The filing by the Company does not involve or affect the operations of O'Charley's, LLC or 99 Restaurants, LLC which are not part of American Blue Ribbon Holdings, LLC. Fidelity Newport Holdings, LLC ("FNH") owns ABRH, LLC which owns the Company. Both FNH and ABRH, LLC will continue operating in the ordinary course and are not parties to the filing.
The Company believes the reorganization will facilitate the Company's Village Inn and Bakers Square restaurant brands evolution to a healthy core of restaurants and support an approach to the brands that is most beneficial for all stakeholders. As part of the reorganization, the Company will explore a variety of strategic and structural initiatives to best position the Company for success in the future.
Legendary Baking, LLC ("Legendary"), owned by the Company, will continue its current operations in the ordinary course. Legendary is a Blue Ribbon award winning manufacturer of over 25 million pies annually and, with the support of the DIP financing, will be able to conduct its business without interruption and looks forward to the support of its associates, suppliers and customers through this process.
The Company's financial trends have been negative since 2017 as the restaurant operations struggled with declining sales and acceptable margins. Those challenges are similar to others in the industry particularly as it relates to higher wage rates. During 2018, a potential transaction to separate the Company's businesses from existing equity ownership was proposed but did not ultimately occur after considerable effort. At that point in the third quarter of 2018, both the restaurant brands and Legendary Baking had new leadership designated to address the performance shortfalls.
During 2018, ABRH, LLC and other non-debtor affiliates assisted the Company in funding its operations. During 2019, in order to fund operating losses, the Company closed and sold its support facility in Denver, closed and sold three fee simple restaurant properties, and accelerated collections of Legendary Baking's receivables, which were all one-time sources of cash flow.
The Company and ABRH, LLC leadership have worked diligently and strategically to improve the efficiency of the businesses, including substantial reductions in G&A expenses, while maintaining effective operational protocols with focus on improving the customer experience. While new leadership substantially improved the performance of the Company's businesses with a reduction of its losses by over third, with most of the improvement coming from Legendary Baking, the expectations for 2020 were continued losses for the Company. ABRH, LLC and other non-debtor affiliate companies are no longer willing to fund the Company's operations which led to the filing.
Accordingly, the Company filed the bankruptcy and closed 33 underperforming stores; obtained post-petition financing that will provide sufficient liquidity for the Company to fund operations during the case; and will explore its strategic options to create a healthy foundation for optimizing the performance of the businesses while under the protection of the Bankruptcy Code. We believe that these efforts will allow the Company and the businesses to maximize their value for the benefit of all stakeholders, including customers, employees and creditors.
The Company has established a toll free hotline for team members, customers and suppliers to address any questions at (833) 991-1558.
American Blue Ribbon Holdings, LLC is owned by ABRH, LLC. Its operations include Village Inn restaurants with 75 company owned locations and 84 franchised locations; Bakers Square with 22 company owned locations; and Legendary Baking with two manufacturing facilities producing over 25 million pies annually with over 75% of sales to third party customers.
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