Bertucci’s Inc., the chain of Italian eateries rooted in the Boston area, will be auctioned off after filing for bankruptcy protection amid intense competition for diners who have less time for sit-down dining.
The closely held restaurant company, based in Northborough, Massachusetts, may close about half its locations and plans to hold an auction where the opening bid will be worth about $19.7 million, Chief Financial Officer Brian Connell said in court papers filed Sunday. An affiliate of Right Lane Capital has agreed to buy the chain should no higher offers come in, Eric Mara with Right said in an email on Monday.
Bertucci’s sought protection from creditors under Chapter 11 of bankruptcy law, which usually allows a company to stay in business while it works out a turnaround plan. It owes about $110 million to lenders, and about $9 million to suppliers, landlords and other unsecured creditors, the company said in the court papers filed in Wilmington, Delaware. Units of CIT Group Inc. and Wells Fargo & Co. were listed as first lien lenders. The chain is owned by an affiliate of Levine Leichtman Capital Partners, court papers show.
“Consumers have more options than ever for spending discretionary income, and their preferences continue to shift towards cheaper, faster alternatives,” the company said in its court papers. “Since 2011, Bertucci’s has experienced a year-over-year decline in sales and revenue.”
Before it filed, Bertucci’s began trying to restructure, hiring Hilco Real Estate LLC to evaluate rent costs and Imperial Capital LLC to study its operations and to try to sell the chain. To cut costs, the company will ask U.S. Bankruptcy Judge Mary Walrath to cancel the leases at 29 of its 59 locations and to approve Right Lane as the so-called stalking horse bidder for the auction.
Right Lane’s initial bid includes $1.7 million in cash, the cancellation of as much as $4 million in debt related to bankruptcy costs and $14 million in new notes. Under the proposed sale, the new owner would take on all of the company’s 4,200 employees.
Bertucci’s woes are part of a broader downturn for midpriced, sit-down restaurant chains. They’ve struggled for years to compete with faster, more modern places where customers don’t have to leave tips. Sales at the top 500 U.S. sit-down restaurant chains rose just 1 percent last year, compared with 3.5 percent growth for the industry, according to data from Technomic.
The chain has been trying to lure diners with its new Express Lunch, which promises to bring orders within 15 minutes. Chief Executive Officer Brian Wright, who took the helm in 2016, started the program to combat rising competition from fast-casual chains like Panera Bread. He’ll continue as CEO, according to a company statement. Landis Rath & Cobb LLP is Bertucci’s bankruptcy counsel, with Schulte Roth & Zabel LLP as special corporate counsel.
Bertucci’s started in 1981 in Somerville, Massachusetts, and became known for making food from scratch ingredients in brick ovens, with an open kitchen so that diners could watch their food being prepared.