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The Friendly's family-restaurant chain is preparing to file for Chapter 11 bankruptcy and seek a buyer, sources have told the Wall Street Journal.
Friendly Ice Cream Crop., the Wilbraham, Mass.-based family-restaurant chain, is preparing to file for Chapter 11 bankruptcy and seek a buyer, sources have told the Wall Street Journal.
Friendly's has hired law firm Kirkland & Ellis and Zolfo Cooper, a turnaround advisory firm, to negotiate with creditors and ready its bankruptcy filing, which could happen as early as next week, the Wall Street Journal reports.
According to the Wall Street Journal:
A slumping U.S. economy has forced many consumers to dine out less frequently, crimping Friendly's sales just as rising prices for corn, butter and other ingredients drained its cash.
The company is burdened with $250 million in debt, and declining revenue has triggered a condition in its credit line with Wells Fargo & Co. that prevents Friendly’s from borrowing as much money as it believes it needs, sources told the Wall Street Journal.
When Friendly’s celebrated its 75th anniversary last year, the company operated 508 Friendly’s restaurants and employed 12,000, the Boston Business Journal reports. The number of employees is now roughly 10,000, according to the Wall Street Journal.
According to Reuters:
Friendly's would be the latest in a number of restaurant chains, including Sbarro, Fuddruckers and Charlie Brown's Steakhouse, to file for bankruptcy because of the economic downturn and a drop in consumer spending.
Sbarro is currently in bankruptcy in New York, where it will either sell itself to the highest bidder or restructure the bulk of its $395 million debt load.