Avado Brands back in Chapter 11 bankruptcy, plans to sell assets

By Caroline Salls

Pittsburgh, Sept. 5 - Avado Brands, Inc., the parent company of Don Pablo's and Hop's restaurants, filed for Chapter 11 bankruptcy Wednesday in the U.S. Bankruptcy Court for the District of Delaware, and the company plans to sell its assets while in bankruptcy.

This is Avado's second attempt at Chapter 11 reorganization. The company emerged from its first bankruptcy case in May 2005 as a private company.

Avado said this filing was prompted in part by declining sales, a need for additional liquidity, increased operating costs and several state-level minimum wage increases.

The company said it has roughly $334,000 in available cash, but it needs more cash to pay $5.8 million in operating costs.

"The board of directors of Avado Brands believes that the sale of the company's assets will result in the company's operations being supported by a better capitalized entity allowing for all of Avado's restaurants to achieve their potential," chairman David Barr said in a company news release.

According to the release, Avado will continue to operate its restaurants during its bankruptcy case, and it expects to emerge from Chapter 11 quickly.

"The management team plans to remain with the company and is confident in the future of Avado Brands and the strength of the Don Pablo's and Hop's restaurants," chief executive officer Raymond "Rick" Barbrick said in the release.

In connection with the bankruptcy filing, Avado is seeking court approval of $67 million in debtor-in-possession financing to be provided by a group of lenders led by DDJ Capital Management, LLC.

The company has requested access to $24 million of the DIP facility on an interim basis, with the interim hearing scheduled for Sept. 6.

Interest on the DIP facility will be 18%.

The DIP facility will mature on the earliest of 90 days from the closing date, upon the sale or liquidation of the company's assets, the effective date of a plan of reorganization or in 30 days if the final DIP order has not been entered.

Avado will pay a $5,000 acceptance fee at the DIP closing and a $7,500 quarterly fee, as well as a 1.5% commitment fee.

According to court documents, Avado has between $1 million and $100 million in both assets and debt.

The company listed no unsecured creditors with claims of $1 million or more.

Avado's pre-bankruptcy debt includes $9.6 million outstanding on a $30 million revolving credit facility, a $10 million term loan A, a $12.5 million term loan B and $14 million in supplemental term loans.

Avado is a Madison, Ga., restaurant company. Its Chapter 11 case number is 07-11276.

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