EAGAN, Minn. - Four years after its first trip through the line Buffets Inc., parent company of Old Country Buffet, is back for a second helping of Chapter 11 bankruptcy reorganization.
On Wednesday, the Eagan-based restaurant company filed a prepackaged bankruptcy case that seeks to eliminate about $245 million in debt and restructure its operations.
The plan includes closing 81 underperforming restaurants out of the almost 500 that Buffets operates nationwide.
The locations weren't disclosed in Wednesday's filing but are expected to become public this week.
"We will recapitalize our balance sheet, eliminate a burdensome debt load and increase our cash flow," said Mike Andrews, Buffets' chief executive. "The decision to close these underperforming restaurants, though difficult, resulted from a comprehensive, store-by-store analysis of financial performance, occupancy costs, market conditions and the long-term strategy of our reorganized restaurant portfolio."
In addition to the 81 closures, the company is also looking for more favorable leases with landlords at other restaurant locations.
"To the extent those leases cannot be modified on acceptable terms, additional restaurant closings may be required," the company said in its news release.
Buffets operates Old Country Buffet, HomeTown Buffet, Ryan's, Fire Mountain and other restaurant brands in 38 states.
Wednesday's filing is a prenegotiated restructuring plan that Buffets reached with lenders who hold 83 percent of the company's senior debt, the company said in a news release.
Under the plan, Buffets would eliminate annual interest payments of more than $30 million in addition to the $245 million worth of reduced debt.
Almost exactly four years ago, Buffets announced its first voluntary bankruptcy filing and a restructuring plan. At that time, the company had 626 restaurants nationally and 37,000 employees.
That plan won court approval in the spring of 2009, when a streamlined Buffets emerged from bankruptcy on supposedly sound financial footing.
But after that downsizing, there remained some restrictions on how many stores could close following bankruptcy, said Melissa Sheer, a company spokeswoman.
"Those have been eliminated," she said.
The company employs about 28,000 at its 500 restaurants, and another looming downsizing isn't a complete surprise. Buffets had announced in May that it was exploring options for handling its sizable debt.
"It's been a challenging time for the restaurant industry," Sheer said. Consumers have been holding onto more of their discretionary income, and the economic recovery the company hoped for when it filed in 2008 has been weak, she said.
The company expects to complete the restructuring and emerge from bankruptcy in about six months.
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