Friendly's Enters Chapter 11 To Implement Quick Financial Restructuring
424 Restaurants Open for Business as Usual; Manufacturing and Distribution Operations Not Impacted
Company Receives Commitment for Approximately $70 Million in Financing
Company Closes 63 Underperforming Restaurants
WILBRAHAM, Mass., Oct. 5, 2011 /PRNewswire/ -- Friendly Ice Cream Corporation and its subsidiaries (collectively "Friendly's"), the operator of Friendly's restaurants and a nationwide distributor of ice cream products, announced today that the Company has filed a voluntary petition under Chapter 11 of the United States Bankruptcy Code in the United States Bankruptcy Court for the District of Delaware. As part of the filing, Friendly's will enter a 363 sale process with an affiliate of its current owners, Sun Capital Partners, as the lead or "Stalking Horse" bidder to quickly restructure the Company and emerge stronger and more competitive.
424 Friendly's restaurants will be open for business as usual during the Company's financial restructuring and there is expected to be no impact to manufacturing and distribution operations.
Friendly's has secured approximately $70 million in debtor-in-possession (DIP) financing, which, along with the Company's cash flow, will provide the working capital necessary to meet its ongoing obligations during the restructuring. The Company expects to be able to continue paying employee salaries and benefits, meet the needs of its guests and retail customers and honor all gift cards.
The decision to financially restructure through a Chapter 11 filing was driven largely by the challenges of the current economic downturn, significantly increased costs, particularly in commodities such as cream, rents that exceed current market rates and certain of the Company's current unrelated liabilities. The filing will provide Friendly's with the tools and time to strengthen its balance sheet, close underperforming restaurants, revisit certain agreements and reposition the Company for long-term success.
"We have embarked on an aggressive campaign to enhance restaurant operations, improve the guest experience, strengthen our team and expand the Company's successful retail ice cream business," said Harsha V. Agadi, Chairman & CEO of Friendly's. "I am particularly pleased with the enthusiastic response among our guests and employees to the recently launched 'High Five' campaign which not only provides great meal values but is also revitalizing our brand in the marketplace.
"Thanks to our dedicated employees and franchisees, we have made a lot of progress, but our Company continued to face significant financial challenges. This was exacerbated by the weak economy and rapidly rising commodity costs that have impacted the entire restaurant industry. The strategic decision to pursue a financial restructuring will allow us to proactively and quickly improve our financial position and ensure we have the resources to build a better and stronger Friendly's for our loyal guests, retail customers, suppliers and other business partners."
As part of its restructuring, Friendly's has closed 63 restaurants (see attached list). After a thorough analysis of the profitability and contribution of all Friendly's locations, including the lease costs involved, the Company made the difficult but necessary decision to close underperforming restaurants. These closures will help the Company realize important cost savings and operational efficiencies that will improve its financial foundation so it can better serve all constituencies. Friendly's has encouraged employees from closed locations to apply at nearby operating restaurants, where available.
Friendly's has appointed the independent financial advisory and investment banking firm, Duff & Phelps, to serve as exclusive financial advisor in connection with the sale of the Company's assets pursuant to Section 363 of the United States Bankruptcy Code. All inquiries with respect to the Section 363 sale process should be made to Joshua Benn, Managing Director at Duff & Phelps, who can be reached at (212) 450-2840, or Joshua.Benn@duffandphelps.com.
About Friendly Ice Cream Corporation
Friendly Ice Cream Corporation is a vertically integrated restaurant company serving signature sandwiches, entrees and ice cream desserts in a friendly, family environment with system-wide sales of $700 million and distribution through more than 7,000 retail locations. With a 76-year operating history, Friendly's enjoys strong brand recognition and is currently revitalizing its restaurants and introducing new products to grow its customer base. For additional information, please visit www.friendlys.com.
List of Closed Friendly's Locations
Boston Post Rd.
Storrs Rd./University Plaza
E. Main St.
Waterbury Shopping Plaza
South Main St.
SR 64 East
Citrus Tower Blvd.
S. Babcock St.
John Fitch Plaza
Mall at Whitney Field
West Boylston St.
Upper Glen St.
SOURCE Friendly Ice Cream Corporation