Sbarro, which is no longer backed by
The quick service restaurant said on Nov. 28 that it had emerged from Chapter 11 with significantly reduced debt and a $35 million capital infusion. “Our reorganization plan eliminates more than 70 percent of our debt, and provides access to $35 million in fresh capital from our new ownership group,” said Nicholas McGrane, Sbarro’s interim president and CEO, in a statement.
Melville, N.Y.-based Sbarro sells pizza, pastas and salads via more than 1000 restaurants across 40 countries (476 are company-owned restaurants and 538 franchised restaurants, Buyouts reported in March). Many of its stores are located in malls, which have suffered during the economic downturn.
MidOcean Partners, a New York mid-market firm, acquired Sbarro in 2007. The firm paid about $450 million for the pizza chain, which included at least $208 million in debt, Buyouts reported.
With its reorganization, Sbarro did manage to cut its debt to about $123.3 million from roughly $403.3 million prior to the bankruptcy, according to a Nov. 23 report from Standard & Poor’s Rating Services. But Sbarro remains highly leveraged because of all its operating lease commitments, said Mariola Borysiak, an S&P credit analyst. ”Leverage remains very high at over 8x” total debt to EBITDA, she said.
The bankruptcy also wiped out MidOcean’s stake, Borysiak said. “MidOcean had a second lien facility and currently first lien lenders are the owners of the company,” she said. Ares’s stake was also wiped out, said a person familiar with the situation.
Officials for Ares and MidOcean couldn’t be reached for comment.
(Luisa Beltran is a senior writer for peHub.)