CraftWorks bankrupt, gets $138 million bid from Fortress affiliate

By Caroline Salls

Pittsburgh, March 3 – CraftWorks Holdings, LLC, which operates Logan’s Roadhouse, Old Chicago, Rock Bottom and Gordon Biersch restaurants and breweries, filed Chapter 11 bankruptcy on Tuesday in the U.S. Bankruptcy Court for the District of Delaware.

According to a news release, CraftWorks filed bankruptcy to implement an agreement that would substantially reduce debt, strengthen liquidity and better position the company and its brands for long-term growth.

The company said it is servicing customers at its 261 locations in 39 states and the District of Columbia as usual, and all 77 franchise locations continue to operate as usual. A total of 37 underperforming locations were closed in recent weeks.

Sale terms

The release said the stalking horse asset purchase agreement reached with an affiliate of senior lender Fortress Credit Co. LLC provides CraftWorks at least $138 million in consideration, plus the assumption of liabilities. The transaction is expected to result in a reduction of the company’s debt by more than $140 million, or more than 60%, and additional liquidity for future investment.

The company said in its sale procedures motion that the Fortress affiliate has not requested that a break-up fee or expense reimbursement be paid to it if it is not ultimately the winning bidder for CraftWorks’ assets.

Under the sale timeline proposed by the company, competing bids would be due by 4 p.m. ET on May 15, an auction would be held on May 19, if necessary, the sale hearing would be scheduled for May 22, and the sale would close by June 1.

Bids at auction must be made in minimum increments of $250,000.

DIP financing

As part of the transaction, a Fortress affiliate has committed to provide $23 million of new-money debtor-in-possession financing, which, subject to court approval, the DIP financing will provide the liquidity necessary to support ongoing operations in the ordinary course during the Chapter 11 process.

The DIP financing package also includes an up to $115 million roll-up of pre-bankruptcy loans.

The facility will mature on the earliest of July 1, April 2 if the final order has not been entered by then, closing of a sale of all or substantially all of the company’s assets, termination of the commitments and acceleration of the loans, the Chapter 11 plan effective date and conversion or dismissal of the Chapter 11 cases.

Interest on the new-money facility will accrue at Libor plus 850 basis points.

“Over the past 16 months, we have made significant progress on many fronts to transform our business and position our brands for long-term growth and success,” CraftWorks chief executive officer Hazem Ouf said in the release.

“These and other efforts are translating into stronger sales trends, with our first quarter off to a solid start for all of our divisions. We are now looking forward to completing an expedited process that we are confident puts our business on solid financial footing for the future.”

The company filed a series of first-day motions, including requests to continue to pay wages and provide benefits to employees as usual and to honor all gift cards and all loyalty programs in the ordinary course. CraftWorks said it intends to continue to pay vendors in the ordinary course for all goods delivered and services rendered after the filing.

Debt details

According to court documents, CraftWorks has $100 million to $500 million in assets and debt.

The company’s largest unsecured creditors are numerous entities with landlord claims in undetermined amounts.

The largest unsecured creditors also include Wells Fargo Bank, NA of Charlotte, N.C., with a $34 million unsecured note claim; Marblegate Special Opportunities Master Fund, LP of Greenwich, Conn., with an $8.23 million unsecured note claim; FS KKR Capital Corp. of Dublin, with a $7.31 million unsecured creditor claim; US Foodservice, based in Chicago, with a $6.52 million trade claim; FS Investment Corp. II of Philadelphia, with a $4.91 million unsecured note claim; Carl Marks Strategic Opportunities Fund II, LP of New York, with a $2.94 million unsecured note claim; Carl Marks Strategic Investments, LP of New York, with a $2.1 million unsecured note claim; FS Investment Corp. III of Philadelphia, with a $1.32 million unsecured note claim; SHCO 56 Sarl, based in New York, with a $1.29 million unsecured note claim; and Kelso Investment Associates VIII, LP of New York, with a $1.2 million unsecured note claim.

Katten Muchin Rosenman LLP is serving as legal counsel to the company, Configure Partners, LLC is serving as investment banker, and M-III Partners, LP is serving as financial adviser.

Chattanooga, Tenn.-based CraftWorks operates and franchises full-service restaurants. The Chapter 11 case number is 20-10475.

© 2015 Prospect News.
All content on this website is protected by copyright law in the U.S. and elsewhere. For the use of the person downloading only.
Redistribution and copying are prohibited by law without written permission in advance from Prospect News.
Redistribution or copying includes e-mailing, printing multiple copies or any other form of reproduction.