Prandium restaurant brands for sale; Koo Koo Roo, Chi-Chi’s file for Chapter 11 – News

Prandium restaurant brands for sale; Koo Koo Roo, Chi-Chi’s file for Chapter 11 – News – Prandium Inc

Amy Spector

IRVINE, CALIF. — The 2002 bankruptcy reorganization of Prandium Inc. apparently did not go far enough to remedy the financial woes at subsidiaries Chi-Chi’s and Koo Koo Roo, both of which filed Oct. 8 for Chapter 11 protection in U.S. Bankruptcy Court in Wilmington, Del.

Meanwhile, court documents reveal that all three Prandium brands–including the casual-dining Hamburger Hamlet chain–have potential buyers.

In securities filings to explain the bankruptcy court action, Prandium chief executive Hugh Hilton said Mexican-dinner-house chain Chi-Chi’s “has entered into a nonbinding letter of intent with CC Acquisition Holding Co. LLC, a newly formed entity whose majority owner is Worldwide Entertainment Inc.”

In addition, the fast-casual chain Koo Koo Roo “has entered into a definitive asset purchase agreement with Fuddruckers Inc.,” he said, adding that “‘The Hamlet Group” was also in negotiations with Fuddruckers.

In previous security filings, Prandium, which is based in Irvine, had referred to the Hamlet group as the restaurants and assets of Hamburger Hamlet, which was acquired by a Prandium predecessor in 1996 and now is a 14-unit chain.

Hamburger Hamlet rejected two sales offers in recent years–a $16.1 million cash bid from Othello Holding Corp. in 2001 and a $15 million cash package from Latin Intellectual Properties in 2002. In Prandium’s Aug. 13, 2003, securities filings, the company lowered its estimate of Hamburger Hamlet’s fair market value from $14.8 million in August 2002 to $11.9 million.

To allow 123-unit Chi-Chi’s and 28-unit Koo Koo Roo’s restaurants to operate, Judge Charles Case reportedly approved $2.4 million in interim debtor-in-possession financing and set a Nov. 5, 2003, court date to hear the bankruptcy petitions.

Neither executives at Prandium, their attorneys nor executives at Fuddruckers had returned calls by presstime, but a report in the Los Angeles Times said Fuddruckers had bid $4 million for Koo Koo Roo. The Hamlet Group transaction was not included in that estimate.

Prandium’s move follows the Chapter 11 filing of another national restaurant company based in California, 21-unit Constellation Concepts, which filed Sept. 17, 2003, for bankruptcy protection through the federal court in Oakland, Calif. Constellation Concepts, based in Emeryville, Calif., operates the California Cafe, Napa Valley Grille and Alcatraz Brewing Co. chains, among other restaurant concepts.

The umbrella company that adopted the Prandium name four years ago has filed for bankruptcy protection several times. In 1993, soon after W.R. Grace Co. spun off several brands in a leveraged deal that became Restaurant Enterprises Group Inc., the company filed for Chapter 11 protection. It reorganized as Family Restaurants Inc., emerged from bankruptcy in 1994 and grew into the nation’s largest Mexican dinnerhouse company, anchored by its Chi-Chi’s and El Torito brands.

After FRI acquired Koo Koo Roo and Hamburger Hamlet, it metamorphosed into Prandium, 53.1 percent of which was sold to Kevin Relyea, its chairman and chief executive, for $15,000 in December 2000. At the time, the company operated and franchised 200 restaurants. Relyea lost his ownership after a 2002 Chapter 11 filing, from which the company emerged later that year.

Relyea exited the company in December, followed in 2003 by the departure of Prandium chief financial officer Robert Trebing, a 20-year veteran of the company whose tenure bagan with W.R. Grace Co. Trebing decamped in August 2003 on the heels of the expiration of a $6.4 million letter of intent to purchase Prandium.

Prandium has attributed the reorganization, which erased nearly $191.4 million in debt, to its sinking performance. Since

**** See PRANDIUM’S page 113

COPYRIGHT 2003 Reproduced with permission of the copyright holder. Further reproduction or distribution is prohibited without permission.

COPYRIGHT 2003 Gale Group