The operator of casual Italian dining chain Romano's Macaroni Grill is exploring a sale of the chain despite having a debt-restructuring deal already negotiated.
The chain's parent company and a handful of its affiliates, including investment vehicle Mac Acquisition LLC, sought chapter 11 protection Wednesday after negotiating a restructuring pact that has the support of the company's largest secured creditors, Bank of Colorado and Dean Riesen's Riesen Funding LLC, court papers show.
Romano's owes more than $23 million in secured debt collectively to Bank of Colorado and Riesen Funding. The company hopes to win the support of other secured creditors, as well as unsecured creditors, during its first few weeks under bankruptcy protection, according to court papers.
"A reorganization under the proposed plan allows the debtors to maintain operations, preserve approximately 4,600 jobs and assume most of its leases and contracts," Chief Executive Nishant Machado said in court papers filed Wednesday.
However, company attorney Jeffrey Krause said in court Thursday that while Romano's believes this deal offers the best outcome for unsecured creditors, the company will explore every option.
The company and its advisers are interviewing investment banks and hope to retain one by next week, Mr. Krause said at the hearing. The investment bank will then "run a parallel process" to see if a buyer could offer better recoveries for the creditors than the current plan.
Romano's aims to file its reorganization plan in the next week, Mr. Krause added.
As part of the plan, Raven Capital Management has agreed to provide the chain with a $5 million bankruptcy loan to fund operations while under chapter 11 protection. On Thursday, Judge Mary Walrath of the U.S. Bankruptcy Court in Wilmington, Del., signed off on the company's use of up to $3 million of the loan.
The company is scheduled to appear before Judge Walrath on Nov. 13 to seek approval to use the rest of the bankruptcy loan.
Romano's closed 37 unprofitable restaurants so far this year. The chain owns 93 restaurants in 23 states and brought in revenue of about $230 million last year.
Since RedRock Partners LLC acquired the chain for $8 million in 2015, Romano's has struggled to handle its debt, Mr. Machado said in court papers.
Like many of its peers, the company blamed its financial woes on the downturn in the casual dining industry as customers have shifted to cheaper, faster alternatives. In recent years, the restaurant sector has been plagued by increased competition, stemming from chains opening too many locations, in addition to decreasing sales and tightened liquidity positions.
Romano's Macaroni Grill joins recent restaurant bankruptcy filings, including soup and sandwich chain Cosi Inc.; steakhouse chain Logan's Roadhouse; and Ignite Restaurant Group, the operator of Joe's Crab Shack and Brick House Tavern + Tap.
Patrick Fitzgerald contributed to this article.
Write to Lillian Rizzo at Lillian.Rizzo@wsj.com
(END) Dow Jones Newswires
October 19, 2017 19:08 ET (23:08 GMT)