Mrs. Fields launches pre-packaged Chapter 11 plan vote solicitation

By Caroline Salls

Pittsburgh, Aug. 15 - Mrs. Fields Famous Brands, LLC launched a solicitation of votes on a joint pre-packaged Chapter 11 plan of reorganization Friday from some of its creditors and interest holders, according to an 8-K filed with the Securities and Exchange Commission.

According to the disclosure statement for the pre-packaged plan, the company is trying to reorganize its capital structure in order to bring it into alignment with present and future operating prospects and to provide it with greater liquidity.

The company said it is highly leveraged in relation to its cash flow, its liquidity position has been steadily deteriorating and is severely restricted, and the company will not be in a position to make the Sept. 15 interest payment due on the old notes.

As previously reported, Mrs. Fields and some of its affiliates have entered into a binding restructuring term sheet and related restructuring support agreements with the members of an informal committee of unaffiliated investors holding more than 78% in outstanding principal amount of Mrs. Fields' 9% and 11½% senior secured notes due 2011.

Under the term sheet, the company has offered to exchange the notes for $90 million in cash, $50 million in new 10% secured notes due 2014 and 87.5% of the equity in the company.

The notes will be issued in an amount of $50 million plus the amount by which the noteholder cash is less than $90 million.

According to the 8-K, the company, the committee and equity sponsor Capricorn Investors III, LP agreed to amend the restructuring term sheet and support agreements to change some of the financial terms and establish revised timelines for the restructuring transactions.

Mrs. Fields said the amended support agreements reconfirm the parties' support for the restructuring and provide for the restructuring to be implemented through a pre-packaged Chapter 11 bankruptcy filing.

The holders of more than two-thirds of the outstanding principal amount of the notes and each of the holders of Mrs. Fields Original Cookies notes and Mrs. Fields Original Cookies equity have agreed to vote in favor of the pre-packaged plan.

Plan creditor treatment

Treatment of creditors under the 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.

Committee changes

In addition, the audit committee and compensation committee of Mrs. Fields Famous Brands' board of managers will each be reconstituted to include all managers of Mrs. Fields Famous Brands.

On Tuesday, Raymond Troubh was appointed to the board of managers, and he is expected to serve on both of the reconstituted committees.

Additionally, Don K. Rice has assumed the role of chairman of Mrs. Fields Famous Brands.

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.

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