Tue 01/26/2021 18:23 PM
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Relevant Documents:
Voluntary Petition
First Day Declaration
DIP Financing Motion
Disclosure Statement
First Day Hearing Agenda

CiCi’s is a pizza buffet restaurant chain with 11 company-owned locations and 307 franchised locations operated by 128 franchisees
RSA with D&G Investors, which purchased all of the prepetition secured debt in December 2020, provides for conversion of debt into new equity
D&G would provide $9 million in DIP financing, inclusive of $3 million of new money

CiCi’s Holdings Inc., a Coppell, Texas-based pizza buffet restaurant chain with 11 company-owned locations and 307 franchised locations operated by 128 franchisees, filed for chapter 11 protection on Monday night in the Bankruptcy Court for the Northern District of Texas. The debtors have entered into a restructuring support and forbearance agreement with D&G Investors LLC, which purchased all of the prepetition secured debt in December 2020. The RSA contemplates a 60-day prepackaged case, through which D&G would convert its secured debt into 100% of the new equity of CiCi’s, with the option to roll over an amount to be determined of its prepetition and postpetition debt into an exit facility on terms to be agreed upon. D&G has also agreed to provide $9 million in DIP financing, including $3 million of new money and a $6 million rollup of its prepetition debt. Continue reading for our First Day team's case summary of the CiCi's pizza chapter 11 filing and Request a Trial for access to the linked documents and analysis as well as our coverage of all U.S. chapter 11 cases filed since 2012 with over $10 million in liabilities.

Parties to the RSA consist of the debtors, D&G Investors (as assignee of Wells Fargo Bank, Citizens Bank, Cadence Bank and Bank of America), and consenting interest holders Arlon Food and Agricultural partners II, AFAP II Co-Invest LP and Continental Grain Co.

The company reports $10 million to $50 million in assets and 50 million to $100 million in liabilities. The company’s prepetition capital structure, which includes $81.6 million in funded debt, is below:

  • Secured debt:

    • Revolving facility: $9.99 million.

    • Term loan facility: $71.65 million.

  • Equity: The company is privately owned. CiCi’s parent is owned by a nondebtor, Pizza Holdings LLC, which is majority owned and controlled by Arlon. Arlon owns 65% of Holdings’ preferred shares and 52.9% of its common shares, with the remaining preferred and common shares owned by Arlon’s co-investors and current and former management.

Each of the revolving and term loan facilities, which share the same first liens on substantially all of CiCi’s assets, mature Aug. 29, 2021. The debtors say that they determined “in the months before” the petition date that certain of the liens on the prepetition credit facility were not properly perfected as the deed of trust for the debtors’ owned distribution center in Coppell, Texas, had not been conveyed and certain liens on trademarks were not properly perfected. Further, the debtors assert that there were existing defaults under the credit agreement, including a lack of deposit account control agreements, “which had been required since 2016 but never executed.” D&G required that the debtors cure these deficiencies as a condition of entering into the RSA. “Although the Debtors recognize that such transfers occurred within 90 days of the Petition Date, the Debtors believe that new value was received in exchange for execution of the perfection documents,” the first day declaration says.

The company attributes the bankruptcy filing to a sudden decline in business brought on by the Covid-19 pandemic while the company was in the middle of an operational turnaround. The operational turnaround was necessary due to a decade of “incredible growth in food delivery,” which undermined CiCi’s all-you-can-eat buffet concept as it relies on in-store dining for 99% of its revenue. Digital ordering and delivery has grown 300% faster than dine-in traffic since 2014, the debtors note, adding that this trend is particularly prevalent among millennials. CiCi’s introduction of digital ordering and delivery services has amplified its reach, but the brand’s reliance on third-party dispatch and delivery platforms has curbed margins “and may reduce customer loyalty over the longer term by lowering switching costs,” the debtors say. Consequently, CiCi’s “must work harder and more creatively to differentiate its offerings from the competition.”

The debtors say that they were “in the middle” of an operational turnaround to address efficiency and market competitiveness when the Covid-19 pandemic brought the economy “to a halt.” Given that on-premises dining had traditionally accounted for the vast majority of sales at CiCi’s restaurants, the shutdowns delivered a “sudden and significant blow” to the business’ liquidity position. In fiscal year 2019, CiCi’s generated approximately $177.3 million of revenue and $14.2 million of adjusted EBITDA, but in the “post-COVID world of 2020,” its revenue declined to $76.3 million with an adjusted EBITDA of negative $2.7 million. To conserve cash, the company ceased making rent payments for certain underperforming stores in April 2020, and for “almost all stores the Company negotiated ‘rent holidays’ in the 2-3 month range.”

A valuation analysis performed by the debtors’ financial advisor and investment banker, TRS Advisors, provides that the debtors’ enterprise value is between approximately $24 million and $31 million, with a midpoint of $27 million.

The first day hearing has been scheduled for tomorrow, Wednesday, Jan. 27, at 11:30 a.m. ET.

The debtors are represented by Gray Reed & McGraw as counsel and Piper Sandler & Co. (through its TRS Advisors division) as financial advisor and investment banker. Stretto is the claims agent. The case has been assigned to Judge Stacey G. Jernigan (case No. 21-30146).


CiCi’s is a privately owned pizza company that was founded in 1985 in Plano, Texas, as an all-you-can-eat pizza concept. The company describes its brand and core mission as delivering “(a) the ultimate all-you-can-eat pizza and gaming experience, (b) a casual, fun, and family-oriented dining environment, and (c) unbeatable value.”

CiCi’s has 318 locations across 26 states, of which 19 are temporarily shut down (seven company-owned and 12 franchise locations), and 67 are permanently closed (six company-owned and 61 franchise locations).

CiCi’s business model “proved attractive to investors” early on, the debtors say, and the brand has undergone several changes in ownership over the past 20 years. CiCi’s was first purchased in a management buyout with Levine Leichtman Capital Partners LLC in 2003, which then sold the company to ONCAP Management Partners in 2007. These firms and their respective investments helped the CiCi’s concept to grow to approximately 650 restaurants in 33 states by 2009, most of which were franchised locations.

Following its growth stage, CiCi’s franchised unit count fell while the company developed a portfolio of over 40 company-owned stores, mostly through acquisitions of franchised locations. As part of this trend, CiCi’s total footprint fell to approximately 430 stores by 2016, when the business was acquired by Arlon Food and Agriculture Partners II LP. Starting in 2019, CiCi’s moved away from owning and operating its restaurants, “deliberately evolving towards a more efficient, 100% franchise system that streamlined operations.” To implement this strategy, CiCi’s focused on capital allocation, strategic refranchising and closures or transfers of company-owned restaurants to franchisees.

By the beginning of 2020, CiCi’s was down to 395 restaurant locations across 25 states, 369 of which (or 96%) were franchised locations operated by 128 different franchisees, most of whom were individuals. This model means CiCi’s has relatively few direct employees, most of whom are employed by debtor JMC Distribution LP (which was founded in 1990 by CiCi’s to support the brand’s restaurants by providing centralized purchasing and distribution capabilities) and none of whom are represented by a collective bargaining unit.

Despite operational changes and cost savings, dwindling liquidity levels led to events of default under the prepetition credit agreement in August 2020. The debtors and their lenders entered into discussions about forbearance, the consensual transfer of control of CiCi’s to the lenders and entering into a cooperation agreement with the lenders regarding an agreeable sale process and fixing the lenders’ collateral deficiencies. As the negotiations accelerated, CiCi’s retained Steve Panagos as independent director to take the lead in negotiations and oversee any eventual sale process or other restructuring transaction. With the help of TRS Advisors, the debtors ran a sale process in November 2020, resulting in four indications of interest for in-court and out-of-court options. While the process was ongoing, D&G purchased all of the outstanding debt obligations arising under the prepetition credit agreement, forcing a relaunch of the negotiation process.

Unlike the prior lender group, the debtors note, D&G expressed a desire to take ownership of CiCi’s. The costs of an in-court transaction and the liabilities associated with an out-of-court transaction were impediments to reaching a deal with D&G, which at one point directed the prepetition agent to initiate and enforce remedies under the prepetition agreement, including proxy rights to replace board members. Despite this action, the parties “re-doubled their efforts, avoided what would have been a value-destructive emergency ‘free fall’ chapter 11, and were ultimately able to reach agreement on the terms of a consensual global prepackaged restructuring that will preserve employee jobs during a tumultuous economic time as well as the livelihoods of CiCi’s franchisees, who are mostly individual business owners.”

The company’s corporate organizational structure chart is shown below:

(Click HERE to enlarge.)

The debtors' largest unsecured creditors are listed below:

10 Largest Unsecured Creditors
Creditor Location Claim Type Amount
Weingarten Realty Investors Houston Trade $   240,675
Saputo Cheese USA Inc. Chicago Trade 164,725
BD Desert Mesa Investments Phoenix Trade 116,944
Regency Centers LP Atlanta Trade 87,382
Murphy Marketplace Station Cincinnati Trade 81,453
Kerry Ingredients & Flavours Rome, Ga. Trade 67,428
Advanced Food Technologies Chicago Trade 62,155
Eddie L. Hill, CPA Decatur, Ala. Trade 57,522
Drinkard Development LLC Cullman, Ala. Trade 55,650
Technomic Chicago Trade 52,437

The case representatives are as follows:

Role Name Firm Location
Debtors' Counsel Jason S. Brookner Gray Reed & McGraw Dallas
Aaron M. Kaufman
Lydia R. Webb
Amber M. Carson
Paul D. Moak Houston
Debtors' Financial Advisor
and Investment Banker
Teri Stratton TRS Advisors Los Angeles
Debtors' Claims Agent Sheryl Betance Stretto Irvine, Calif.
Co-Counsel to D&G
Holland O’Neil Foley & Lardner Dallas
Mark C. Moore
Co-Counsel to D&G
David Morris David Morris
Law Firm
Carrollton, Texas
Financial Advisor to
D&G Investors
N/A CR3 Partners N/A
Counsel to the
Consenting Interest
Paul Basta Paul Weiss
Rifkind Wharton
& Garrison
New York
Karen Zeituni

DS Approval Motion / Confirmation Timeline

The debtors’ disclosure statement approval motion proposes the following confirmation-related timeline:

Plan / Disclosure Statement

A chart of the plan’s classes, along with their impairment status and voting rights, is shown below:

Treatment of Claims and Interests

The debtors’ plan sets forth the following classification of and proposed distributions to holders of allowed claims and interests:

  • Class 1 - Other priority claims: Payment in full in cash or other agreed treatment.

  • Class 2 - Other secured claims: At the option of the debtors, either (a) payment in cash in full, (b) reinstatement, (c) return or abandonment of the collateral securing the claim or (d) other agreed treatment.

  • Class 3 - Prepetition credit agreement secured claims: Except to the extent converted into exit loans, would receive the new common equity in exchange for the prepetition credit agreement secured claims and the DIP claims.

  • Class 4 - General unsecured claims (including the prepetition lender deficiency claim): Pro rata share of general unsecured recovery pool of $50,000.

  • Class 5 - Intercompany claims: At the election of the applicable debtor, either (a) unimpaired and reinstated or (b) impaired and canceled and released without any distribution.

  • Class 6 - Intercompany interests: At the option of the applicable debtor (in consultation with the consenting lender) either (a) “Reinstated in exchange for the Debtors’ and the Reorganized Debtors’ agreement to make distributions under the Plan,” or (b) discharged, canceled, released and extinguished with no distribution.

  • Class 7 - Interests in parent: Canceled, released, discharged and extinguished; no distribution.

Exit Facility

The plan contemplates the conversion of up to $9 million of DIP claims and “an amount to be determined of Prepetition Credit Agreement Claims” into a new exit facility.

Consenting Interest-Holder Contribution

The RSA also states that the consenting interest-holders would provide $100,000 to the company on the plan effective date to “pay the sources and uses and other administrative costs of the Company in connection with the substantial consummation of the Plan.”

Financial Projections

The debtors include financial projections for fiscal years 2021 through 2023, as shown below:

Liquidation Analysis

The debtors attach a hypothetical liquidation analysis to the DS, assuming conversion to chapter 7 on March 17.

(Click HERE to enlarge.)


According to a valuation analysis performed by the debtors’ financial advisor and investment banker, TRS Advisors, the debtors’ enterprise value is between approximately $24 million and $31 million, with a midpoint of $27 million, assuming an effective date of March 17, 2021.

Other Plan Provisions

The plan provides for releases of (a) the debtors, (b) the reorganized debtors, (c) the prepetition lender, (d) the prepetition administrative agent, (e) the exit facility agent, (f) the DIP lender, (g) the consenting lender, (h) all holders of interests in Pizza Holdings LLC and (i) the consenting interest holders. In addition, the plan includes an exculpation provision in favor of (a) the debtors, (b) the reorganized debtors, (c) any appointed statutory committees and each of their respective members, (d) the DIP lender, (e) the prepetition administrative agent, (f) the consenting lender and (g) the exit facility agent.

DIP Financing Motion

The debtors are seeking authorization to enter into a $9 million senior, superpriority, priming DIP facility with the debtors’ prepetition secured lender D&G Investors LLC, consisting of a $3 million new-money line of credit and $6 million in rollup loans. On an interim basis, the debtors are requesting authority to draw up to $250,000 of the new-money loan and up to $500,000 of the rollup loan. Debtor CiCi’s Holdings Inc. would be the borrower, with the remaining debtors guaranteeing the DIP facility.

In the DIP motion, the debtors say that under the proposed plan, they would satisfy the DIP and prepetition obligations through a combination of new equity in the reorganized debtors and, “potentially,” an exit facility.

The DIP financing bears interest at 15%, with an additional 5% for the default rate. The DIP facility matures on the earliest of: (a) April 10, (b) the closing of a sale of substantially all of the debtors’ assets, (c) the substantial confirmation of a confirmed plan and (d) the date of acceleration of the loans.

The DIP proceeds may be used for: (a) general corporate purposes, (b) payment of interest and fees associated with the DIP facility, (c) payment of estate, DIP lender and prepetition lender professionals, (d) refinancing certain amounts under the prepetition credit agreement and (e) payment of restructuring and case expenses.

To secure the DIP financing, the debtors propose to grant first priority liens on all of the debtors’ assets, including avoidance actions and their proceeds. The prepetition lender has consented to the priming of its prepetition liens.

The DIP facility contemplates mandatory prepayments of 100% of the net cash proceeds from any sale of assets outside the ordinary course of business in excess of $100,000 as well as 100% prepayment upon the occurrence of an event of default.

The rollup provides that, upon entry of the interim order authorizing the draw of $500,000 of the rollup loan, that amount will be deemed to refinance and repay the prepetition obligations. Subject to the entry of a final order, the full $6 million would be rolled up.

The only fees contemplated under the proposed DIP facility are the adequate protection payments in the form of reimbursement of professional fees and costs incurred by the DIP lender and of the prepetition administrative agent on a weekly basis.

The debtors propose to indemnify the DIP lender.

Subject to final order, the DIP lender would have the right to credit-bid the full amount of the DIP, and the prepetition lender would have the right to credit-bid prepetition obligations.

In support of the proposed DIP financing, the debtors filed the declaration of Teri Stratton, managing director of TRS Advisors, who states that although the debtors “are able to operate on their existing cash for the short-term, they can only do so with the consent of their Prepetition Lender, and only without paying debt service and restructuring professional fees.”

The company proposes the following adequate protection to the prepetition lender: (a) replacement liens, (b) allowed superpriority administrative expense claims and (c) payment of the prepetition lender’s fees and expenses. The debtors also propose providing adequate protection payments equal to the monthly amount of default interest under the prepetition credit agreement. For the first 60 days of the cases, there would not be any adequate protection provided to the lenders on account of the prepetition debt, provided that if the plan is not confirmed by the 60th day from the petition date, then on day 61 the lenders would receive go-forward adequate protection payments equal to the monthly amount of default interest payable under the credit agreement.

In addition, the debtors propose a waiver of the estates’ right to seek to surcharge its collateral pursuant to Bankruptcy Code section 506(c) and the “equities of the case” exception under section 552(b), subject to entry of the final order.

The carve-out for professional fees is $100,000.

The proposed budget for the use of the DIP facility is as follows:

(Click HERE to enlarge.)

The DIP financing is subject to the following milestones:

  • Jan. 25: File DIP motion, disclosure statement, plan and DS approval motion;

  • Jan. 30: Entry of the interim DIP order;

  • March 1: Entry of the final DIP order;

  • March 11: Entry of the confirmation order; and

  • 60 days after entry of the confirmation order: Effective date.

The proposed challenge period is the earlier of 14 days prior to any confirmation hearing and 30 days after entry of the interim DIP order. The UCC’s lien investigation budget is $25,000.

Other Motions

The debtors also filed various standard first day motions, including the following:

  • Motion for joint administration

    • The cases will be jointly administered under case No. 21-30146.

  • Notice of designation as complex chapter 11

  • Motion to pay employee wages and benefits

    • The company seeks authorization to pay approximately $188,000 in outstanding prepetition workforce obligations, all of which will become due within 21 days of the case, including approximately $150,000 in wage obligations, approximately $20,000 in reimbursable employee expenses, approximately $10,000 on account of the non-insider employee incentive program and approximately $8,000 with respect to payroll deductions. Additionally, the company seeks the authority to pay approximately $18,000 on account of the workers’ compensation program.

  • Motion to use cash management system

    • The company has bank accounts with PlainsCapital Bank, Bank of America, Frost Bank and Wells Fargo Bank.

  • Motion to maintain insurance programs

  • Motion to pay taxes and fees

    • The debtors estimate they have accrued approximately $69,000 in prepetition taxes and fees, of which approximately $30,000 will become payable in the first 21 days of the case.


  • Motion to continue customer programs

    • The debtors estimate approximately $272,500 in outstanding gift card obligations. Additionally, the debtors estimate that they owe approximately $2,500 in gift card program fees, which will become due within the first 21 days of the case.

  • Motion to reject executory contracts and unexpired leases

    • The company seeks to reject unexpired leases, which include non-operating restaurant locations, a former corporate office location and a vacant warehouse, as listed HERE. The company states that administrative rent for these leases is anticipated to be approximately $175,000 per month.

  • Motion to pay 503(b)(9) claims and PACA claims

    • The debtors seek the authority to pay the following prepetition 503(b)(9) and PACA claims:

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