Executives at restaurant chain Back Yard Burgers filed for bankruptcy protection Wednesday, saying they already have secured support for a turnaround plan from their top lender and majority owner.
The pre-negotiated Chapter 11 filing came just weeks after the downtown-based company — it moved its headquarters here after being bought in 2007 by a private investment consortium — closed 19 of its restaurants in Nashville, Memphis, and two Arkansas markets. In papers submitted in bankruptcy court in Delaware, the chain lists assets of less than $10 million and debts of between $10 million and $50 million. Its more than 60 franchised locations are not part of the Chapter 11 filing.
In a statement, the company said the Chapter 11 move — check out the full petition here — represents "the final phase of a plan to restructure debt, reduce operating expenses, and position Back Yard Burgers to grow its business." Three debtors are listed as being owed at least $50,000. By far, the largest is Gordon Foodservice, which Back Yard owes almost $400,000. The Tennessee Department of Revenue is due more than $150,000, while Lexington, Ky.-based Right Place Media is owed about $60,000.
Majority owner Pharos Capital Funds and the company's main lender have agreed to back the restructuring and Pharos has committed to debtor-in-possession financing.
"This agreement is the culmination of an ongoing plan to improve the Company’s operations by restructuring debt, addressing underperforming locations and identifying opportunities for growth," Boyd said. "Having an agreement with two of our major stakeholders provides an increased level of certainty that we thought was important, for not only the Company and our customers, but for our loyal employees and business partners."
The company earlier this summer made news for different legal reasons after two senior executives filed suit. One, Carl Diaz, the company's former vice president of HR and compliance, accused Boyd of retaliating against him after he reported on claims that the CEO mistreated a number of co-workers. The other, former COO Andy Abbajay, accused Boyd of illegally firing him.
The Chapter 11 filing is a stark reversal from the $38 million sale five years ago for members of BBAC LLC, the entity that brought together Pharos co-founder Bob Crants with former Shoney's CEO Steve Lynn, ex-Waffle House CFO Michael McCarthy and others. At the time, the buyers looked at Back Yard as "a rare combination of niche status in QSR along with a strong regional growth opportunity."