Buffets files reorganization plan, pre-bankruptcy secured lenders to receive most new stock

By Caroline Salls

Pittsburgh, Oct. 31 - Buffets Holdings, Inc. filed its plan of reorganization and related disclosure statement Thursday with the U.S. Bankruptcy Court for the District of Delaware, positioning the company to emerge from Chapter 11 bankruptcy during the first quarter of 2009, according to a company news release.

Buffets said it expects to emerge from its reorganization with a stronger balance sheet, significantly less debt and greater resources to operate effectively and invest in its business.

Over the past several months, the company said it has focused its efforts on right-sizing the organization, including streamlining its portfolio of restaurants and reducing operating expenses across the business.

Now that it has filed its plan of reorganization, Buffets said it will focus on securing exit financing to replace its debtor-in-possession financing and to provide future working capital.

The plan calls for the company's existing lenders to become significant shareholders upon emergence.

Buffets said it expects to emerge from bankruptcy as a privately held enterprise, with an initial board of directors comprised of five directors, four of whom will be designated by the company's pre-bankruptcy lenders.

Current chief executive officer Mike Andrews will continue to serve as a director.

"The filing of our plan of reorganization and disclosure statement marks a substantial achievement in the Chapter 11 process," Andrews said in the release.

"We believe that all of the parties involved will agree that the proposed plan is a fair and reasonable settlement and compromise of all outstanding issues and provides the best opportunity for maximum recoveries for creditors."

Plan creditor treatment

Under the plan:

• Holders of administrative claims, priority tax claims and other priority claims will recover 100% in cash;

• Holders of other secured claims will recover 100% either through reinstatement of the claim, payment in cash or the return of the collateral securing the claim;

• Holders of the company's pre-bankruptcy senior secured loans will receive 93.7% to 96.1% of the newly issued common stock in the reorganized company;

• Holders of senior notes and deficiency claims related to the pre-bankruptcy senior secured loans will receive 3.3% to 5.3% of the newly issued common stock;

• Holders of general unsecured claims will receive 0.6% to 1% of the newly issued common stock for an estimated recovery of 1.9% to 3.1%;

• Holders of general unsecured claims of $25,000 or less can participate in a convenience class in which they will receive cash equal to 8% of their allowed claims.

Holders of general unsecured claims of greater than $25,000 can elect to reduce their allowed claim to $25,000 so that they can participate in the convenience class; and

• The company's current common stock and warrants will be extinguished upon its emergence from bankruptcy and holders will receive no distribution.

Buffets Holdings, a steak-buffet restaurant company based in Eagan, Minn., operates restaurants under the names Old Country Buffet, HomeTown Buffet, Ryan's and Fire Mountain. The company filed for bankruptcy on Jan. 22, 2008, and its Chapter 11 case number is 08-10141.

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