Restaurant claims that one lender is attempting a takeover.
K.G. IM LLC, parent of well-known Italian concept Il Mulino, filed bankruptcy for several of its restaurants July 30 as it battles one of its lenders.
The 16-unit company filed on behalf of seven locations across Miami, Puerto Rico, Las Vegas, Long Island, and Atlantic City. The locations not included in the filing are five New York City stores—the flagship in Greenwich Village and four locations in Manhattan—and two in Florida, one in Tennessee, and another in the Poconos.
In the filing, co-owner Gerald Katzoff said that when COVID hit the U.S., Il Mulino locations across the country shut down, beginning with the stay-at-home order in New York. On May 7, the company received roughly $2.3 million from the Paycheck Protection Program. The restaurant intends to use the loan to fund operations during bankruptcy. As of now, six of the seven bankrupt locations are closed, and Long Island and Miami are operating in a limited capacity.
Katzoff said that thanks to the PPP funds, he believed the restaurant was on its way to stabilizing operations, protecting the Il Mulino brand, and managing through COVID. He also felt it would allow the brand to find a path forward with satisfying $36.3 million owed to lender Benefit Street Partners. But Katzoff added that after the restaurant secured the PPP funding, “it became clear that BSP had other plans for the restaurants.”
The co-owner claimed that almost immediately after Il Mulino received the PPP funds, BSP began to implement plans to take over the company, including “putting in place a path for BSP to wipe out all stakeholders in a debt to equity conversion play” without giving the brand an opportunity to “stabilize operations and run a fair and transparent process toward finding an exit out of the COVID-19 lockdown.”
“Simply put, it was clear that BSP viewed the COVID-19 impact as a chance to unfairly leverage the Debtors and seize control of the restaurants in a manner that is not consistent with the rights afforded the parties under the Term Loan Agreement or applicable law,” Katzoff said in the filing.
As an example, Katzoff pointed to June 2—before the maturity of the Term Loan Agreement—when BSP alleged certain events of default and said it had voting control over the restaurant. In response, Il Mulino “made it crystal clear” that BSP did not have that power. However, BSP did not relent, and negotiations failed. So the restaurant filed bankruptcy to “curtail those efforts and to further explore various restructuring alternatives.”
“The Il Mulino restaurants that are the subject of these chapter 11 cases are part of an iconic brand with significant growth potential,” Katzoff said. “BSP, however, has attempted to exploit the unavoidable consequences of the Covid-19 pandemic and its impact on restaurants like Il Mulino in an effort to take control of the Debtors and their assets at a point in time when the Debtors’ businesses have been stressed to an unprecedented extent. That, of course, is grossly unfair.”
Katzoff said the company intends to resume operations at closed locations as soon as possible and return to profitability. The restaurant will use the bankruptcy proceedings “to restructure its debt, seek out new financing opportunities, explore potential transactions, and liquidate claims.”
Il Mulino was established in 1981 and serves authentic Abruzzo regional cuisine. The restaurant has gained fame with celebrities over the years, including Leonardo DiCaprio, George Clooney, Bill Murray, President Obama, and Drake.