Piccadilly Restaurants Files for Chapter 11 Bankruptcy in Louisiana
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Piccadilly Restaurants Files for Chapter 11 Bankruptcy in Louisiana

September 30, 2012


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Piccadilly Restaurants, a chain of family-friendly cafeterias based in Baton Rouge, Louisiana, is filing for Chapter 11 bankruptcy, according to a report from the Memphis Commercial Appeal.

The reason the cafeteria chain is filing for bankruptcy is fairly simple. Last week, one of the company’s senior creditors filed collection lawsuit seeking nearly $26 million in unpaid principal and interest on a prior loan.

By filing for bankruptcy, Piccadilly is looking to take advantage of the automatic stay, which puts a stop to collection lawsuits and gives debtors more time to create a debt repayment plan.

The automatic stay can also play a role in consumer bankruptcy filings, where it's used to stop wage garnishment, prevent car repossession, and thwart home foreclosure proceedings.

In this case, Piccadilly’s leadership filed for bankruptcy in order to protect itself and its employees from the “aggressive legal maneuver” that was taken by Atalaya Capital Management, the firm that holds the cafeteria chain’s debt.

In order to protect the company’s 3,464 employees, who work at a total of 81 restaurants, Piccadilly’s key officials decided to seek debt relief in U.S. Bankruptcy Court in Lafayette, La.

The company’s chief executive officer claimed in the bankruptcy filings that the company may owe as much as $50 million to various creditors, which means Piccadilly has a lot of work to do before it can leave bankruptcy court.

The cafeteria chain was founded in Baton Rouge in 1944, and has developed a strong presence in southern states, where similar restaurants seem to appear in every mid-sized town.

A shift among American eaters to healthier fare has reduced consumer demand for the type of all-you-can-eat buffets offered at restaurants like Piccadilly.

In addition, during the recent recession, many consumers cut their spending on restaurant food, choosing instead to cook at home, which is usually a much cheaper alternative.

In the last 12 months, a number of other restaurant chains have also filed for Chapter 11 bankruptcy, so Piccadilly is hardly alone.

And by filing for bankruptcy now, the company will be able to at least put a temporary stop to the collection lawsuit by its creditor, and give itself an opportunity to continue serving food while it gets its finances in order.

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