Judge said deal was 'best available option.'
A federal bankruptcy court approved Wednesday a $93 million credit bid by senior lender Fortress Investment Group to acquire CraftWorks, parent of Logan’s Roadhouse and Old Chicago Pizza & Taproom.
The deal is $45 million less than the original offer. The restaurant chain had an agreement with Fortress in March for $138 million.
Fortress said during the proceedings that it plans to keep at least 150 units open, Law360 reported.
The Judge overseeing the case referred to the deal as the “best available option” amid the overwhelmingly detrimental effects of the COVID-19 pandemic. Otherwise, Craftworks may have been forced to file Chapter 7 bankruptcy, meaning the company would surrender its assets and close permanently.
The deal was approved despite concerns from landlords who fear that rent valued between $2 million and $4 million will go unpaid with the bankruptcy estate only having $500,000 to $750,000 in cash to cover administrative costs, Law360 reported. It was argued that landlords with leases that won’t be assumed by Fortress will have to fend for themselves unless Craftworks is able to impose surcharges on Fortress to offset costs.
Craftworks filed bankruptcy in March after shuttering 37 underperforming locations earlier in the year. The company entered bankruptcy with 261 company-owned stores and 77 franchises. In the filing, the company said it was negatively impacted by an “overleveraged capital structure and low levels of liquidity” dating back to the acquisition of Logan’s in 2018. The low liquidity prevented Craftworks from properly investing in its restaurants. In addition, costs of rent and higher wages further strained liquidity and hampered the brand’s ability to sustain operations.
With the onset of the COVID-19 pandemic and closure of dining rooms, Craftworks was forced to close its 261 stores and terminate a majority of its 18,000 employees that were previously furloughed. A court document said fewer than 25 employees were retained “to help preserve, maintain, and secure their assets during the shut-down period.” Because of the significant loss in revenue, attorneys for Craftworks asked the judge to pause bankruptcy proceedings at the time.
Marc Buehler also replaced Hazem Ouf as CEO. Ouf and CFO Jim Lebs exited the company in March after they allegedly paid millions in sales tax to state authorities without the company’s knowledge.
Craftworks’ other brands include Big River Grille & Brewing Works, ChopHouse & Brewery, A1A Ale Works, Ragtime Tavern Seafood & Grill, Seven Bridges Grille & Brewery, and Sing Sing, a Big-Bang dueling pianos concept.
In addition to Craftworks, Fortress recently acquired bankrupt fast-food chain Krystal for roughly $48 million.