Rubio’s Restaurants files pre-packaged Chapter 11 bankruptcy case

By Sarah Lizee

Olympia, Wash., Oct. 26 – Rubio’s Restaurants, Inc. filed Chapter 11 bankruptcy on Monday in the U.S. Bankruptcy Court for the District of Delaware to implement a restructuring agreed to among the debtors and its major stakeholders, including some of its secured lenders and an investor.

“As is the case with nearly every other restaurant chain in the country, if not the world, the debtors have spent the last eight months navigating the challenges imposed by the Covid-19 pandemic,” the company said in its disclosure statement.

The company’s capital structure currently includes $4.05 million outstanding under a revolving credit facility, $68.24 million under a term loan facility and $10 million under a PPP loan.

The company said its capital structure post-emergence will consist of a $52 million exit facility, an investor investment of $6 million and $18 million of reorganized equity interests.

The plan calls for conversion of about $55 million secured loan claims to equity and the exit facility and treatment of about $18 million of secured lender deficiency claims as general unsecured claims.

Each holder of secured loan claims will receive a pro-rata share of a portion of an exit facility, after accounting for the exit conversion amount, in a principal amount equal to $37 million and the reorganized equity interests.

Each holder of an allowed administrative claim will receive a cash payment in full.

Each holder of an allowed priority tax claim will be treated in line with the terms under section 1129(a)(9)(c) of the Bankruptcy Code.

Each holder of an allowed other priority claim will be paid in full in cash or receive other recovery as is necessary to satisfy section 1129 of the Bankruptcy Code.

On the effective date, all DIP claims will convert on a dollar-for-dollar basis into loans under, or otherwise paid or satisfied by, the exit facility in an amount equal to an exit conversion amount.

Each holder of an other secured claim will receive payment in full in cash, delivery of the collateral securing their claim and any required interest, reinstatement of their claim or other treatment rendering the claim unimpaired.

All PPP loan claims, for which the debtors have requested 100% loan forgiveness, will be treated as general unsecured claims to the extent not forgiven.

All general unsecured claims will be discharged and will receive no distribution.

Each intercompany claim will, at the option of the debtors and the consenting secured lenders, be reinstated or cancelled, released and discharged without any distribution.

All subordinated claims will be cancelled, released and discharged as of the effective date, and will be of no further force or effect.

All existing equity interests will be cancelled, released and discharged without any distribution.

The intercompany equity interests will be cancelled, released and discharged without any distribution, provided however that at the option of the debtors and the consenting secured lenders, the intercompany equity interests may be reinstated for administrative convenience.

The debtors are seeking a combined hearing on approval of the disclosure statement and confirmation of the plan on Dec. 14.

DIP financing

The company is seeking approval of an $8 million superpriority secured debtor-in-possession term loan, with $4.5 million to be funded on, following an interim order, and the remaining amount to be funded, following a final order.

Golub Capital Markets LLC is the administrative agent for the DIP loan.

The loan would mature on the earliest of Dec. 31, the plan effective date, and the date written notice is sent from the administrative agent of the occurrence of a termination date.

Proceeds will be used for working capital and other general corporate purposes.

Interest will be paid in cash at Libor plus 750 basis points, subject to a Libor floor of 1.25%, and in kind at an incremental 4%.

There is a $90,000 closing fee on the DIP loan.

The debtors are also seeking to access the cash collateral of its pre-bankruptcy secured lenders, including Golub as administrative agent.

Debt details

The company listed $50 million to $100 million in assets and $100 million to $500 million in debt.

The largest unsecured creditors are SunWest Bank of Glendale, Calif., with a $10 million PPP loan claim; Southwest Traders Inc. of Temecula, Calif., with a $3.24 million trade claim; the Internal Revenue Service of Philadelphia, with a $2.48 million Cares Act payroll tax deferral claim; and the State of California with a $1.45 million sales tax claim.

Rubio’s Restaurants is fast casual restaurant chain based in Carlsbad, Calif. The Chapter 11 case number is 20-12688.

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