Mon 11/02/2020 14:53 PM
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Relevant Documents:
Voluntary Petition
Press Release
First Day Declaration
Combined Plan / DS
Sale Motion
Cash Collateral Motion
First Day Hearing Agenda

Continue reading for the First Day team's analysis of the Friendly's chapter 11 private sale and request a trial to access the above documents as well as reporting and analysis of hundreds of other stressed, distressed and performing credits.


Debtors operate the Friendly’s casual dining restaurant chain, with approximately 50 corporate restaurants on a go forward basis and franchisor for about 80 locations
Seek private sale of substantially all assets to Amici Partners Group, LLC, an affiliate of restaurant franchising company, BRIX Holdings, LLC for $2M
Plan proposes to pay all creditors in full; prepetition secured lenders, which are both non-debtor affiliates, would waive the full amount of their secured debt of approximately $87.9 million

FIC Restaurants, Inc., a Wilbraham, Mass.-based operator of the casual dining restaurant chain Friendly’s, with approximately 50 corporate restaurants on a go forward basis and about 80 franchised locations, filed for chapter 11 protection on Sunday night in the Bankruptcy Court for the District of Delaware, along with four affiliates, including Friendly’s Restaurants, LLC. The debtors propose a private sale “(not subject to overbid)” of substantially all assets to Amici Partners Group, LLC, an entity affiliated with BRIX Holdings, LLC for $1,987,500. BRIX is a multi-brand franchising company with national and international experience in the restaurant industry, whose franchise portfolio includes Red Mango® Yogurt Café Smoothie & Juice Bar, Smoothie Factory® Juice Bar, RedBrick Pizza® Kitchen Cafe and Souper Salad® chains. Closing of the sale is conditioned on confirmation of the debtors’ proposed plan, which contemplates using the sale proceeds along with “substantial contributions from the Debtors’ secured lenders” to pay all allowed claims in full. Accordingly, the debtors state: “The plan is an unimpairment plan and therefore does not require solicitation of votes.”

In support of the plan, the debtors have also obtained a binding commitment from their two secured lenders, both non-debtor affiliates - first lien lender Sun Ice Cream Finance II, LP and second lien lender Sun Ice Cream Finance, LP - to waive, release and discharge the full amount of their secured debt of approximately $87.9 million. The secured debt waiver and discharge would be effectuated through a “100-cent, unimpaired” combined plan and disclosure statement through which senior lender Sun Ice Cream Finance II, LP would serve as plan sponsor by “(a) causing the above-noted secured debt waiver and discharge after the effective date of the Plan for both it and Sun Ice Cream Finance, LP, and (b) advancing up to $7.5 million in cash under the 2019 Senior Credit Facility … prior to the Plan Sponsor’s debt waiver and discharge, again, such that all obligations under the senior facility will no longer be outstanding.” The first day declaration adds that “other indirectly affiliated entities to the Plan Sponsor in the Debtors’ capital structure are also waiving and releasing substantial claims if the Plan goes effective, including over $430,000 in claims held by SIC Property, LLC for deferred rent related to corporate-owned locations, and substantial management fees owed to the Debtors’ parent entities.”

“To mitigate the risk of the Purchaser backing out of the process, the Plan Sponsor has committed to purchase the Assets on the same terms contained in the Purchase Agreement. Such commitment and the other contributions by the Plan Sponsor under the Plan are subject, however, to the Court approving an expedited Sale and Plan process that will keep these Chapter 11 Cases on budget and permit creditors to receive prompt payment in full on their allowed claims by the end of the year,” according to the first day declaration of CRO Marc Pfefferle. The debtors propose a combined plan and disclosure statement hearing on Dec. 17.

The sale, the debtors say, would allow the “preservation and continuance of the 85 year old Friendly’s brand as a seminal brand in the northeast,” as it has been “for decades.”

“While the purchase price is not substantial, the Sale allows the business to continue, the Friendly’s Restaurants brand and thousands of jobs across the corporate-owned and franchised locations to be saved, the franchisees to be protected and served, and the overall claims pool to be dramatically reduced by virtue of the Purchaser’s assumption of numerous key contracts and the overwhelming majority of the restaurant leases,” Pfefferle says.

The first day hearing has been scheduled for tomorrow, Tuesday, Nov. 3 at 10 a.m. ET.

The company reports $10 million to $50 million in assets and $50 million to $100 million in liabilities. The company’s prepetition capital structure includes:

  • Secured debt:

    • Senior 2019 credit facility (Sun Ice Cream Finance II, LP): $43.4 million (principal and interest)

    • 2018 credit facility (Sun Ice Cream Finance II, LP): $32.1 million (principal and interest)

    • 2011 credit facility (Sun Ice Cream Finance, LP): $12.4 million (principal and interest)

    • Letters of credit:

      • BMO letter of credit: $7.1 million

      • M&T letter of credit: $750,000

  • Unsecured trade debt: $1.1 million

  • Equity: Debtor Neapolitan is a holding company that holds 100% of the equity interests of FIC Holdings, which in turn owns 100% of the interests in FIC Restaurants, Inc. and 100% of the voting interests in Friendly’s Restaurants, and Friendly’s Franchising. Non-debtor Sundae Group Holdings I, LLC (an affiliate of Sun Capital Partners, Inc.) holds 100% of the equity of debtor Neapolitan Group Holdings.

The 2019 credit facility is senior to both the 2018 credit facility and the 2011 credit facility. The letters of credit are fully cash collateralized.

“In the face of shifting demographics, increased competition, and rising costs,” the debtors and and their advisors sought to stem their cash burn, restore the business to profitability and limit the brand’s dependence on borrowing under its prepetition credit facilities through the closure of unprofitable locations, reducing occupancy and other fixed costs and improving the business at the remaining restaurants by delivering “menu innovation, re-energized marketing, and a better overall experience for customers.” The debtors’ progress, however, was “sharply interrupted, or better stated halted, by the catastrophic impact of COVID-19 that caused a dramatic decline in revenue due to the need to close dine-in operations for several months at all franchise and corporate-owned locations,” the first day declaration says.

A prepetition sale process commenced in November 2019 with the help of Duff & Phelps led to five indications of interest. After various Covid-19-related disruptions to the marketing process, only one of the interested parties, BRIX Holdings (which later designated its affiliate Amici as the purchaser), remained willing and submitted a letter of intent for the purchase of the debtors’ assets subject to a 363 sale process under bankruptcy. As a “national and international franchisor background specializing in the restaurant industry,” the debtors say that the purchaser and its affiliates “bring a unique understanding of the Friendly’s brand and the franchise aspect of the business.”

The debtors are represented by Womble Bond Dickinson (US) as counsel, Duff & Phelps Securities as mergers and acquisitions advisor and Carl Marks Advisory Group as financial advisor. Marc Pfefferle of Carl Marks Advisory Group is the chief restructuring officer. Donlin, Recano & Company is the claims agent. The jointly administered case number is 20-12807 (FIC Restaurants, Inc.). The case has been assigned to Judge Christopher S. Sontchi.


Founded in 1935 as a single ice cream shop in Springfield, Mass., Friendly’s grew into a chain of casual dining restaurants that the debtors say is “widely regarded as an authentic, yet affordable, dining experience, with a broad menu offering and hallmark ice cream dessert selection catering to all family members.”

On a go forward basis, the debtors expect to have approximately 50 corporate restaurants and serve as franchisor for another approximately 80 locations. The debtors have approximately 34 full-time employees at their Wilbraham, Mass., headquarters and 1,664 other part-time and full-time restaurant employees and restaurant and regional managers, none of whom are unionized.

Friendly’s is the 26th chapter 11 filing by a restaurant chain so far this year, after last week’s filings by Rubio’s Coastal Grill, which operated approximately 170 restaurants as of its petition date. Reorg’s restaurants monthly for September/October delves into chapter 11 recent restaurant filings and an overview of credit-driven developments affecting the restaurant industry.

The debtors' corporate organizational structure is below:

(Click HERE to enlarge)

The debtor's largest unsecured creditors are listed below:

10 Largest Unsecured Creditors
Name Location Claim Type Amount
US Foods Inc. Rosemont, Ill. Trade Accounts
$   502,719
Engie Insight
Services Inc.
Spokane, Wash. Trade Accounts
SMS Assist LLC Chicago Trade Accounts
Levin Management
Plainfield, N.J. Trade Accounts
Quality Retail
System Inc.
Schaghticoke, N.Y. Trade Accounts
Urban Edge
Properties LP
Paramus, N.J. Trade Accounts
Milelli Morris
Plains LLC
Morristown, N.J. Trade Accounts
St John Neumann
Merrimack, N.H. Trade Accounts
Discover Financial
Riverwoods, Ill. Trade Accounts
Wind River
Environmental LLC
New York Trade Accounts

The case representatives are as follows:

Role Name Firm Location
Debtors' Counsel Matthew P. Ward Womble Bond
Wilmington, Del.
Ericka F. Johnson
Morgan L. Patterson
Nicholas T. Verna
Debtors' Financial
Advisor and CRO
Marc L. Pfefferle Carl Marks
Advisory Group
New York
Debtors' Investment
N/A Duff & Phelps
New York
Debtors' Claims
Nellwyn Voorhies Donlin, Recano &
New York
Counsel to Sun
Ice Cream Finance II
Craig A. Wolfe Morgan, Lewis &
New York
Co-Counsel to the
Rakhee V. Patel Winstead PC Dallas
Annmarie Chiarello
Co-Counsel to the
John E. Lucian Blank Rome Wilmington, Del.
Jose F. Bibiloni
United States
Linda Casey Office of the
U.S. Trustee
Wilmington, Del.

Cash Collateral Motion

The debtors request the use of cash collateral of the prepetition secured lenders as a bridge to sale closing and confirmation, proposing as adequate protection replacement liens and superpriority administrative expense claims and financing reporting. “All post-petition intercompany claims by and among the Debtors, their subsidiaries and affiliates will be tracked and documented, and will be subordinated to the Adequate Protection Liens and Adequate Protection Superpriority Claims,” the proposed order adds.

In addition, subject to the final order, 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).

The carveout for professional fees is $50,000.

The proposed budget for the use of cash collateral is HERE.

The use of cash collateral is subject to the following milestones:

  • Combined plan / DS: Filed within three days of petition date

  • General bar date order: Entered within 30 days of the petition date

  • Order confirming combined plan / DS: Entered by Dec. 31

The debtors say that as there are no proposed releases or stipulations related to the validity or perfection of the prepetition secured parties’ liens, that there is “no corresponding need for a ‘challenge period’ to contest such stipulations.”

Sale Motion

The debtors seek approval of a private sale of substantially all of their assets to Amici Partners Group, LLC, an entity affiliated with BRIX Holdings, LLC for $1,987,500. The debtors request a sale closing by mid-December to avoid “costly, non-recoverable, and otherwise avoidable seven-figure insurance-related” costs at the beginning of January, plus increased seasonal operating expenses in the first quarter of 2021. “The additional expenses would be difficult for the Debtors to maintain even if they were permitted to use cash collateral past December 31, 2020 – which is not currently permitted,” the debtors stress. The proposed purchaser has also refused to close during the holiday period of Dec. 25 to Dec. 27.

The debtors urge approval of a private sale process, noting that the proposed purchaser is the only third party still expressing interest in purchasing the business after a year-long prepetition marketing process. In November 2019, Duff & Phelps began a marketing process, contacting 40 potential strategic buyers and 76 potential financial buyers, resulting in executed confidentiality agreements with 11 strategic buyers and 22 financial buyers and five initial indications of interest. After a pause in the process due to the Covid-19 pandemic, the proposed purchaser was the only entity to submit a letter of intent.

The outside date to close the sale is March 31, 2021 (assuming no auction, as the debtors have requested) and May 31, 2021 (if an auction is required and occurs).

The company issued a press release on Sunday saying that Amici is “an entity comprised of experienced restaurant investors and operators who have been involved with some of the most well-known QSR and casual dining chains for more than 25 years. Amici is currently affiliated with BRIX Holdings, a multi-brand franchising company with national and international experience in the restaurant industry.”

DS Approval Motion / Confirmation Timeline

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

Combined Plan / Disclosure Statement

The debtors would fund distributions under the plan from (a) cash generated by continued operations, and cash collateral; (b) proceeds from the concurrent private sale of substantially all assets; (c) borrowing under the credit agreements prior to the petition date and (d) “commitments obtained from the Plan Sponsor to fund additional amounts after the Effective Date pursuant to existing availability under the Senior 2019 Credit Facility (and prior to the waiver, release and discharge of the senior credit facility).”

Treatment of Claims and Interests

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


The plan provides for releases and exculpation of the debtors, the reorganized debtors, the plan sponsor, Sun Capital and the purchaser.

Other Motions

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


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