Burdened by debt from a 2005 private equity takeover, the Uno pizzeria chain's parent company filed for Chapter 11 protection Wednesday, with plans to give its lenders a controlling equity stake in exchange for debt.
Privately owned Uno Restaurant Holdings Corp. said a majority of its bond holders had agreed to convert $142 million in senior secured debt into a 96 percent equity stake in the reorganized company. That conversion is part of a prearranged restructuring the company hopes a bankruptcy judge will approve.
CEO Frank Guidara said the company doesn't expect its restaurants' to be disrupted.
"Our goal is to get on the other side of our balance sheet problem, and this is going to get us there," Guidara told The Associated Press about the bankruptcy filing.
Investment firm Centre Partners Management LLC owns a majority stake in Uno, which took on $142 million in debt to consolidate the chain's ownership in 2005.
The need to refinance that debt drove the chain to file for bankruptcy.
Uno's Chairman Aaron Spencer still owns 20 percent, the company reported in court filings. Under the proposed plan, both his stake and Centre Partners' interest in the chain will be eliminated with the rest of the existing shares, though Spencer and other owners will end up with some equity.
Casual dining chains like Uno's have struggled during the recent downturn as high unemployment and tightened credit have kept their usual customers at home.
With the proposed restructuring, Guidara said the company could emerge from court protection in 90 days to 120 days.
Uno's, based in Boston, filed its bankruptcy in the U.S. Bankruptcy Court in the Southern District of New York. A Chapter 11 filing is designed to help a business restructure debt and otherwise cut costs to emerge as a standalone company.
The first Uno's opened in 1943 in Chicago. Spencer, the current chairman, opened the first Boston location in 1979 and started expanding the chain in the mid-1980s, according to the company Web site.
Uno has negotiated a $52 million loan to fund operations while it is under court protection. It also will need to secure an exit loan before it can emerge.