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Mamma Mia! Sbarro LLC Turns to Bankruptcy Once Again

April 22, 2014

0310-sbarro_full_600          The well-known pizza chain Sbarro LLC, and its numerous related entities (“debtors,” collectively), filed for Chapter 11 bankruptcy protection in the United States Bankruptcy Court for the Southern District of New York on March 10, 2014.  A motion filed by debtors for joint administration of the cases was granted on March 12, and the case has been assigned to the Honorable Martin Glenn.

Both assets and liabilities in the case are listed to be between $100 million and $500 million. Between 1,000 and 5,000 creditors are estimated to exist, with various lease obligations constituting the bulk of debtors’ unsecured debt. However, Vistar Corporation, a trade creditor, holds the largest unsecured claim at approximately $540,000.

According to debtors’ pre-packaged reorganization plan, debtors propose to classify claims in the following manner: (1) Other Priority Claims; (2) Other Secured Claims; (3) Prepetition Secured Lender Claims; (4) General Unsecured Claims; (5) Intercompany Claims; (6) Equity Interests in Sbarro Holdings, Inc.; and (7) Intercompany Interests. The pre-packaged plan stipulates that classes (1), (2), and (7) will be “unimpaired.”  Impaired creditors are those whose legal rights against the company are being changed by the reorganization plan. Usually, this means the plan calls for paying them less, and usually far less, than what they’re owed.  Unimpaired creditors are those whose legal rights against the company aren’t changed by the plan

 

This is not the first time the debtors have turned to bankruptcy for relief. In April 2011, the rocketing prices of raw materials and declines in mall traffic (where many of debtors’ stores are located) forced debtors to file Chapter 11. Debtors’ emerged from bankruptcy having slashed debts from approximately $400 million to $130 million.

Debtors are represented by Nicole Greenblatt of Kirkland & Ellis, LLP.

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