Just a week after two potential buyers of the SouthEast Waffles restaurant chain agreed in court on how they would put their rival plans to creditors for a vote, one of them has given up on its plan to buy the 105 Waffle House outlets and exit Chapter 11 bankruptcy proceedings.
Southeast Waffles submitted a one-sentence notice to Nashville's U.S. Bankruptcy Court yesterday, stating that it was withdrawing the reorganization plan it had filed on July 21, 2009 and asking the court to "take no further action with respect to its withdrawn plan of reorganization."
Southeast Waffles had partnered with GS Acquisitions LLC to offer more than $20 million for the assets. GS was an affiliate of Gaylord Sports Management, an Arizona firm privately owned by Gaylord Entertainment heir E.K. Gaylord II. Its principals included golfer Phil Mickelson and Terry Pefanis, former chief operating officer of Big Idea Inc., which created the VeggieTales children's entertainment franchise.
On August 11, lawyers for all parties involved took part in a hearing on procedures for presenting the Gaylord plan and a plan earlier filed by corporate franchisor Waffle House Inc. to creditors, who would vote by mail to choose one or the other. A hearing to confirm the winning plan was set for Sept. 29.
While the parties concurred on procedural matters, lawyers for Waffle House Inc. and Southeast Waffles argued about the status of seven or eight restaurants of which Waffle House Inc. has already assumed ownership. Judge Keith M. Lundin refused to rule on the matter, calling it "a mosquito in the room" that did not need to be adjudicated that day.
But perhaps it was not the only skeeter in the room. Gary Murphey, the court-appointed administrator of SouthEast Waffles, cited conflicts with Waffle House Inc. when issued a statement to NashvillePost.com this afternoon explaining why the company dropped out.
"While SouthEast Waffles believed the GS Acquisitions proposal to be a good and viable offer," Murphey said. "Waffle House’s objections last week made it clear that Waffle House would vigorously oppose confirmation of the plan to sell the operations to GSA. It was clear that Waffle House was going to contest SouthEast Waffles’ ability to assign the franchise over to GS Acquisitions.
"Furthermore, WHI also made it clear that if those rights were assigned over Waffle House’s objections, Waffle House did not plan to cooperate in the future with GS Acquisitions in connection with additional store openings or other discretionary issues under the franchise agreements.
"After the hearing," Murphey said, "there were discussions among GS Acquisitions and the committee of unsecured creditors about the SouthEast Waffles plan and the issues surrounding it. Late last week, the committee of unsecured creditors informed me and GS Acquisitions that the committee would not be supporting the GS Acquisitions plan and requested that the debtor withdraw its plan."
"Since more than 60 percent of the unsecured debt owed by SouthEast Waffles is held by members of the Committee, SouthEast Waffles withdrew its plan."