Mrs. Fields reorganization plan confirmed despite exit financing challenges

By E. Janene Geiss

Wilmington, Del., Oct. 2 -Mrs. Fields Original Cookies, Inc. received confirmation Thursday of its plan for reorganization from the U.S. Bankruptcy Court for the District of Delaware.

Verifying that the company had met the conditions in the plan, attorneys for the company told judge Peter J. Walsh that Mts. Fields obtained $10 million in exit financing through a three-year credit facility from a group of note holders that represent about 60% of its debtors.

The exit financing proved challenging in light of the current market crisis, said David Hurst, the Delaware attorney representing Mrs. Fields.

"We are in the position that the only source of funding was from the note holders," Hurst said.

However it was important to Mrs. Fields that it emerged from bankruptcy as soon as possible. The credit facility has no revolver and has an interest rate of 1,200 basis points.

"It's more than the company would like to pay. But the alternative was an extreme loss of value if we stayed in Chapter 11," Hurst said. "It's not ideal, but it's a company out.

Michael Ward, Mrs. Field's interim co-chief executive officer, said the note holders "came together in support of the company."

"We are so excited to come out of bankruptcy on the date we said we would," Ward said.

Through the reorganization, Mrs. Fields said it was able to address both long- and short-term financial challenges. The company reached its goal of building a stronger balance sheet and got needed cash to fund operations and growth, company officials said in a news release that noted confirmation came just 40 days after the prepackaged filing.

Treatment of creditors

The approved plan did not include any material changes from the pre-packaged deal filed by the company Aug. 24. The treatment of creditors will include:

• Holders of administrative expense claims, priority claims, general unsecured claims and priority tax claims will be paid in full in cash;

• Holders of other secured claims will be paid in full either in cash or through the return of the collateral securing the claim;

• Holders of $195.75 million in secured note claims will receive a share of note holder cash, new notes and 87.5% of the equity in the reorganized company;

• Holders of $6.48 million in Mrs. Fields Original Cookies note claims will receive 12.5% of the new equity in the reorganized company, a two-year warrant and $1.05 million in cash.

The exercise price with respect to each share of common stock issuable upon exercise of the warrant will be an initial sum plus 10.47% interest on the initial sum. The initial sum will be the principal amount outstanding on the old notes plus interest, minus $140 million, divided by 18.875%, divided by the total number of warrant shares initially issuable;

• Holders of intercompany claims and section 510(b) claims will receive no distribution under the plan; and

• Mrs. Fields Holding, as the holder of the Mrs. Fields Original Cookies equity interest, will receive no recovery; Mrs. Fields Original Cookies, as the holder of the MFOC subsidiary interests, will have those interests reinstated and will remain the 100% parent company of Mrs. Fields Famous Brands; and Mrs. Fields Famous Brands, as the holder of the MFFB subsidiary interests, will have the interests reinstated and will remain the 100% parent company of each of its debtor subsidiaries.

Mrs. Fields, based in Salt Lake City, has 2,100 franchised and licensed concept locations worldwide. Its subsidiaries include franchisors of the Mrs. Fields Cookies and TCBY franchise systems. The company filed for bankruptcy on Aug. 24 and its Chapter 11 case number is 08-11953.

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