Bloomberg Law
May 11, 2021, 3:37 PMUpdated: May 11, 2021, 5:56 PM

Cosi Gets Bankruptcy Case Dismissed to Apply for Covid Relief (1)

Leslie A. Pappas
Leslie A. Pappas
Staff Correspondent

Cosi Inc. convinced a court to dismiss its Chapter 11 case, allowing the fast-casual restaurant chain to apply for a new, federal relief program for the restaurant industry that’s largely unavailable to bankrupt companies.

The company’s emergency request to dismiss the case is unusual but rational, Judge Brendan L. Shannon of the U.S. Bankruptcy Court for the District of Delaware said at a hearing Tuesday. The judge, in approving the company’s motion, noted that Cosi isn’t eligible to apply for a grant from the Restaurant Revitalization Fund until its reorganization plan is confirmed.

The $28.6 billion RRF relief fund, which is part of the $1.9 trillion Covid relief package passed by Congress in March, offers restaurants grants of up to $10 million. Cosi tried to accelerate its bankruptcy case earlier this month to apply for the grant, hoping that an interim court confirmation of its plan would make the company eligible.

But the Small Business Administration, which is administering the fund, informed Cosi on May 7 that interim plan approval wouldn’t be enough. Under agency policy, companies that have filed for bankruptcy can’t apply for relief unless they have a court-confirmed plan.

It was the second time since Cosi filed for bankruptcy in February 2020 that the SBA had rejected its request for Covid relief.

Cosi tried early in its bankruptcy to get a loan under the CARES Act’s Paycheck Protection Program, but the SBA rejected the application because the company was in Chapter 11.

The PPP rejection was “a gut punch” and being turned away for RRF “was the upper cut to the jaw that put us on the canvas,” Cosi’s attorney, Mark E. Felger of Cozen O’Connor, said at the hearing Tuesday.

The RRF funds will likely run out if Cosi doesn’t immediately get its application in the queue, Felger said. Cosi will apply to the program as soon as its case is dismissed, he said.

The SBA’s policy on eligibility for RRF grants is the same as the one for PPP loans. The agency updated its guidance in April to allow companies with court-approved bankruptcy plans to apply for PPP loans.

The SBA is taking no position on Cosi’s steps to dismiss the case, Dominique Sinesi, an attorney from the Department of Justice representing the SBA, told the court.

Shannon also gave his preliminary approval to Cosi’s disclosure statement, enabling the company to seek votes on its plan outside of court. The judge also agreed to reinstate the case later on five days’ notice if Cosi requests it.

“Go forth and apply, and good luck with the application,” Shannon said.

Cosi’s lenders and trade creditors also supported the emergency dismissal.

The case is In re Cosi, Inc., Bankr. D. Del., No. 20-10417, hearing 5/11/21.

(Updated with additional details throughout)

To contact the reporter on this story: Leslie A. Pappas in Wilmington, Del. at

To contact the editors responsible for this story: Laura D. Francis at; Roger Yu at