Krystal files bankruptcy after closing underperforming restaurants

By Caroline Salls

Pittsburgh, Jan. 21 – The Krystal Co. filed Chapter 11 bankruptcy on Sunday in the U.S. Bankruptcy Court for the Northern District of Georgia.

“In the past few years, the debtors have experienced strong industry headwinds due to a combination of shifting consumer tastes and preferences, growth in labor and commodity costs, increased competition and unfavorable lease terms,” chief restructuring officer Jonathan M. Tibus said in a statement filed with the court.

Tibus said Krysta took steps to close unprofitable restaurant locations and, before closing these restaurants, undertook a comprehensive review of its nonresidential real estate portfolios and identified underperforming restaurant locations with the most significant losses.

While it opened three restaurants over the past 12 months, Tibus said the company closed 44 restaurant locations, including 13 on Dec. 16, to help improve its financial position and liquidity.

In addition, Tibus said Krystal is investigating a security incident that involves one of the payment processing systems that services some of their restaurants and is cooperating with law enforcement and has notified the payment card networks of the investigation.

To date, Tibus said the investigation has revealed that about one-third of Krystal’s restaurants are not impacted by the incident.

In connection with the bankruptcy filing, Krystal is seeking court approval to use the cash collateral of its pre-bankruptcy lenders to fund its operations while in bankruptcy.

According to court documents, Krystal has $10 million to $50 million in assets and $50 million to $100 million in debt.

The company’s largest unsecured creditors are the Tombras Group of Knoxville, Tenn., with a $4.22 million trade payable claim; and US Foods, Inc., based in Rosemont, Ill., with a $2.87 million trade payable claim.

No other unsecured creditors were listed with claims of $1 million or more.

King & Spalding LLP and Scroggins & Williamson, PC are representing Krystal in its Chapter 11 proceedings.

Krystal is a Dunwoody, Ga.-based chain restaurant operator. The Chapter 11 case number is 20-61065.

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