On March 3, 2020 (the “Petition Date“), CraftWorks Parent, LLC (the “Company”), and thirty-seven of its affiliates (collectively, the “Debtors”) each filed a voluntary petition for relief under chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware.
The Debtors are represented by Katten Muchin Rosenman LLP as lead counsel and Klehr Harrison Harvey Branzburg LLP as Delaware counsel. The case has been assigned to the Honorable Brendan Linehan Shannon. A hearing on the Debtors’ first day motions was held on March 4, 2020. A meeting to form the unsecured creditors’ committee will be held on March 11, 2020.
The Debtors are an operator and franchisor of steakhouses and craft beer brewery restaurants with over 330 locations in thirty-nine states, the District of Columbia, and Taiwan. The Debtors’ core brands include Logan’s Roadhouse, Old Chicago Pizza & Taproom, Gordon Biersch Brewery Restaurant, and Rock Bottom Restaurant and Brewery, as well as various other speciality brands, each with a local presence. In addition to operating restaurants, the Debtors have a profitable franchising unit that licenses their operations in approximately seventy-one locations across the U.S. and six in Taiwan.
Since their acquisition of Logan’s Roadhouse in November 2018, the Debtors’ business has been hampered by an overleveraged balance and lack of sufficient liquidity to fund operations, including necessary capital expenditures and investment in their restaurants. These issues have been compounded by other internal and external factors, such as underperforming stores, unfavourable leases, redundant selling, general and administrative expenses and a general decline in same-store traffic and sales. In particular, the craft brewing and restaurant industry have faced considerable challenges given the proliferation of competition, and the Debtors’ major competitors have undertaken brand revitalization investments to appeal to changing tastes.
The Debtors worked with their real estate advisor to renegotiate leases and obtain rent concessions, after which they closed thirty-seven underperforming and unprofitable stores. In addition, the Debtors instituted corporate initiatives and created a more efficient corporate structure, internal enterprise, and operational mechanisms that streamlined operations and cut costs. However, these fixes have not been enough to overcome the strain on the Debtors’ liquidity. When the Debtors lacked sufficient cash to make the required interest payment under a loan agreement in late 2019/early 2020, they began working with their advisors to find a value-maximizing solution that would fix their balance sheet, provide necessary liquidity, and allow their restaurants to continue operating.
The Debtors entered into a forbearance agreement with one of their prepetition lenders, Fortress Credit Co LLC (“Fortress”), and a group of its affiliated lenders, which provided a necessary breathing spell and permitted the Debtors to regroup and evaluate options. As a result, in consultation with their advisors, the Debtors have determined that a sale and auction process would be the best way to maximize value for all stakeholders (See Hazem Ouf Affidavit in Support).
As of the Petition Date, the Debtors have approximately $235.4 million in outstanding debt, consisting of $131.7 million in a loan and line of credit from Fortress and its affiliated lenders, $35 million in loans from Wells Fargo Bank, National Association (“Wells Fargo”) and its affiliated lenders, $34 million in an unsecured recovery note from Wells Fargo, $4.7 million in letters of credit from Wells Fargo, and $30 million in unsecured sellers notes from Roadhouse Holding, Inc. and its affiliated lenders. In addition, the Debtors have approximately $12,636,664 outstanding with trade creditors.
Fortress has committed to providing $23 million of new money loans under a proposed DIP facility which, taking into account a roll-up and letter of credit facility, totals $142.7 million. The Debtors have submitted a thirteen-week cash-flow budget of $162,000. In addition, Fortress has also agreed to submit a stalking-horse bid, subject to an auction and sale process.
| Approximately $171.4 million. | ||||||||||||||||||||||||||||||||||||||||||
| Approximately $64 million, plus at least $12.6 million in trade debt. | ||||||||||||||||||||||||||||||||||||||||||
| FIRST DAY RELIEF FOR AUTHORIZATION TO PAY AND PAYMENTS | ||||||||||||||||||||||||||||||||||||||||||
| Interim Relief $162,000. | Final Relief $162,000. | |||||||||||||||||||||||||||||||||||||||||
| Interim Relief Unspecified; Debtors seek authority to remit and pay outstanding amounts as they come due. | Final Relief Unspecified; Debtors seek authority to remit and pay outstanding amounts as they come due. | |||||||||||||||||||||||||||||||||||||||||
| Interim Relief An aggregate amount not to exceed $6 million. | Final Relief An aggregate amount not to exceed $10 million. | |||||||||||||||||||||||||||||||||||||||||
| Interim Relief Unspecified, but approximately $725,000 is outstanding in rewards points, and $41.8 million is outstanding in gift cards. Debtors seek authority to administer programs without interruption. | Final Relief Unspecified, but approximately $725,000 is outstanding in rewards points, and $41.8 million is outstanding in gift cards. Debtors seek authority to administer programs without interruption. | |||||||||||||||||||||||||||||||||||||||||
| Employees: Approximately 3,700 full-time; 14,300 part-time. | ||||||||||||||||||||||||||||||||||||||||||
| Interim Relief An aggregate amount of approximately $12,500,000.
As of the Petition Date, the Debtors estimate the following is outstanding:
No payment shall exceed the statutory cap of $13,650. | Final Relief Unspecified.
The Debtors estimate the following will come due in the Interim:
No payment shall exceed the statutory cap of $13,650. | |||||||||||||||||||||||||||||||||||||||||