Quiznos says creditors agree, but bankruptcy filing still possible
December 24, 2011 7:24PM
Updated: January 26, 2012 4:56PM
DENVER — Quiznos says a majority of its creditors have agreed to a plan by the restaurant chain to restructure or pay off some $875 million in debt, but it may yet file for Chapter 11 bankruptcy protection.
The plan outlined Friday calls for one of Quiznos’ major creditors, investment firm Avenue Capital, to invest $150 million of new equity capital into the chain.
The investment would be made up of equity and the conversion of debt to equity, and would make Avenue Capital majority owner of the Denver-based sandwich seller.
The plan would eliminate nearly one-third of Quiznos’ debt and provide it with $75 million to continue operating.
Quiznos says it will file for bankruptcy protection if it fails to reach restructuring deals with all of its creditors and cannot receive significant concessions from former executives and certain landlords and former area developers.
Quiznos CEO Greg MacDonald said the company expects to continue operating as usual and to honor all its vendor obligations while it pursues the out-of-court restructuring process.
In April 2010, the company disclosed it received a significant capital injection from its primary shareholders and had the terms of its debt extended to give it more financial breathing room.
But this summer, the company hired advisers to help it restructure.
The Wall Street Journal reported in July that Quiznos had told its lenders that results in its latest quarter would likely come in well below previous projections. Its revenue fell as customer traffic dropped during the recession.
The restructuring plan Quiznos announced Friday calls for part of the funding provided by Avenue Capital to be used to retire nearly $300 million of the company’s first-lien debt. AP