Bankruptcy Might Be on Horizon for Quizno's
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Bankruptcy Might Be on Horizon for Quizno’s

January 5, 2012

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BusinessWeek.com reports that Quizno’s, the Denver-based sub and sandwich chain, is considering a Chapter 11 bankruptcy plan if it is unable to come to debt restructuring agreements with all of its creditors. At present, it seems the company has reached repayment agreements with most of its creditors, and will pay off or restructure $875 million in unresolved debts.

Part of its repayment plan reportedly currently includes a cash infusion of $150 million from Avenue Capital, an investment firm that would take a majority ownership of Quizno’s if and when the financing deal goes through.

That ownership will be exchanged for some of the company’s debt (that is, Avenue Capital will accept partial ownership in exchange for the money Quizno’s owes). The remainder of the cash infusion will go toward day-to-day operating expenses.

The decision of whether or not to submit a Chapter 11 bankruptcy petition hinges on whether or not certain creditors will agree to out-of-court debt restructuring plans. The options currently available to Quizno’s creditors include transferring first-lien debts to second-lien debts, extending the payment deadline on certain debts (after receiving a down payment), and accepting a proportional stake in ownership of the company.

Among the creditors the company is waiting to hear from are former executives, landlords, and some developers. While the company is apparently asking these creditors to accept substantially compromised debt repayment terms, these creditors could lose even more money if Quizno’s decides to enter bankruptcy protection.

If it does choose to enter Chapter 11 bankruptcy, sources note that Quizno’s will likely move through the courts with a pre-packaged bankruptcy plan. The court may be able to force the hand of creditors who are unwilling to bargain with the sub seller without legal restrictions.

At its peak of popularity, Quizno’s operated nearly 3,500 stores in the United States; however, it currently maintains only about 2,000 of those locations. The economic downturn hurt sandwich sales as people began eating out less and Quizno’s was forced to close the doors of more than a thousand locations.


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