Cookie maker Mrs. Fields files for Chapter 11 bankruptcy
16 Aug 2008
Mumbai: Salt Lake City-based cookie and frozen yogurt company Mrs Fields Famous Brands LLC has announced that it plans to file for bankruptcy.
Mrs. Fields cookies product line includes fresh-baked speciality cookies and brownies.
Its TCBY stores, acronym for 'The Country's Best Yoghurt' retails soft-serve frozen yoghurt. The company has 1,268 franchise and licensed locations in 22 countries including the US.
The company's website attributes the first Mrs. Fields cookie store to Debbie Fields, which was opened in Palo Alto, California, in 1977, Franchising started in 1990.
The company has started seeking support from its creditors for a Chapter 11 plan, and filed it with the US Securities and Exchange Commission (SEC).
Under the plan, unsecured creditors would be paid in full, though equity holders would not receive any payments. The SEC filing said that funds affiliated to Capricorn Investors LP, majority owners of Mrs. Fields support the restructuring.
In its SEC filing, the company said it was highly leveraged relative to its cash flow, and that its liquidity position has been steadily deteriorating. It said liquidity is ''currently severely restricted'', and the company will not be in a position to make the interest payment due on 15 September.
The proposed plan calls for senior note holders to swap their existing notes for cash, new notes and 87.5 per cent of the equity in the new company, a return of about 86.5 per cent.
Holders of Mrs. Fields Original Cookies Inc. notes would swap them for cash, 12.5 per cent of the equity in the new company and warrants to buy more shares for an estimated recovery of 96.4 per cent.
Mrs. Fields had ended the second quarter with assets of $139.1 million, and debt of $259.4 million of which $195.8 million was long-term.
A pre-packaged bankruptcy is designed to help the company emerge from Chapter 11 quickly, as creditors get to vote on the terms of the reorganization before the actual bankruptcy filing.
Mrs. Fields has battled declining sales over the past year. Other recent bankruptcies in the industry include casual dining chains Bennigan's and Steak and Ale, and retailers like Boscov's Inc., Steve & Barry's LLC and Sharper Image Corp. While S&A Restaurant Corp, which owned Bennigan's and Steak & Ale chains, filed for Chapter 7 liquidation in July 2008, Buffets Holdings Inc, which operated Old Country Buffet and Ryan's steakhouses filed for Chaper 11 bankruptcy protection in January 2008.
