Cosi Inc. is seeking to accelerate its bankruptcy case in order to have a shot at federal funds available to restaurants struggling during the pandemic.
The fast casual chain hopes to have a hearing on confirming its plan by June 30, according to court filings. Judge Brendan L. Shannon of the U.S. Bankruptcy Court for the District of Delaware already approved Cosi’s request for an expedited hearing on interim approval of its plan disclosures, setting the date for May 11.
The Restaurant Revitalization Fund, part of the $1.9 trillion Covid relief package signed into law in March, provides restaurants and bars with up to $10 million from a $28.6 billion fund. The Small Business Administration, which administers the RRF, is now accepting applications for the program.
The RRF is likely to be underfunded, meaning “applicants who do not submit their applications as soon as the window for applications opens will not be approved for the grant” because the money has dried up, Cosi said in an April 30 filing.
The fast casual chain previously tried for a Paycheck Protection Program loan but was thwarted when the SBA blocked bankrupt borrowers from applying.
The restaurant’s push to expedite its plan isn’t surprising, as a shift in SBA policy regarding PPP applications is expected to push small, bankrupt companies toward faster plan approvals. The agency recently said businesses with court-confirmed plans aren’t “presently involved” in bankruptcy and, thus, can apply for the loans.
The SBA has taken a similar stance with respect to the RRF, according to agency guidance.
Cosi should be entitled to the maximum $10 million from the RRF, according to its calculations. That amount would allow the company to reorganize in Chapter 11, rather than converting to Chapter 7 for a straight liquidation. Only its post-bankruptcy lenders would be paid under the latter scenario, it said.
The plan, filed April 30, swaps pre-bankruptcy secured lenders’ $24 million of debt for 100% of new common stock in the reorganized company. Pre-bankruptcy shareholders would get nothing for their interests.
Unsecured creditors would recover about 20% of their claims, assuming the company receives RRF funding at expected levels, Cosi said. Unsecured claims total about $10.6 million, according to Cosi’s disclosure statement.
Cosi filed Chapter 11 in February 2020, its second bankruptcy filing since 2016. The company said it would shift its focus to catering services.
The case is In re Cosi, Inc., Bankr. D. Del., No. 20-10417, disclosure statement filed 4/30/21.