Mrs. Fields emerges from pre-packaged bankruptcy case

By Caroline Salls

Pittsburgh, Oct. 24 - Mrs. Fields' Original Cookies, Inc. emerged from Chapter 11 bankruptcy Friday with an improved balance sheet, a good working capital position and new ownership, according to a company news release.

"The pre-packaged bankruptcy filing was the perfect means to complete the company's reorganization," interim co-chief executive officer Michael Ward said in the release.

"Within 60 days of filing the Chapter 11 petition, we were able to significantly de-lever the company's balance sheet, establish a credit facility to support our working capital needs and emerge from bankruptcy fully capable of meeting and exceeding customer expectations."

The company said it is now poised to generate profitable growth for its franchising, gifting, branded retail, and licensing businesses.

In 2009, Mrs. Fields said it expects to open more than 40 new franchised stores, grow its gifting and branded retail businesses by more than 15% and grow its licensing business by about 30%.

As previously reported, attorneys for the company told judge Peter J. Walsh at the company's plan confirmation hearing that Mrs. Fields obtained $10 million in exit financing through a three-year credit facility from a group of noteholders 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, at the confirmation hearing.

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

Plan creditor treatment

Treatment of creditors under the company's pre-packaged plan 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 noteholder 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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