CraftWorks Parent LLC got access to $4 million for critical expenses while it puts its Chapter 11 bankruptcy on hold to wait out the new coronavirus pandemic.
The Logan’s Roadhouse owner’s debtor-in-possession loan was approved Wednesday by Judge Brendan L. Shannon of the U.S. Bankruptcy Court for the District of Delaware despite landlord protests that the company doesn’t intend to pay rent for six weeks.
“I’m deeply troubled by the prospect that this is a budget that does not provide for post-petition rent on commercial properties,” Shannon said, “but we are in a very, very unusual circumstances.”
The short-term financing is a win for the restaurant chain, which was forced to close all 261 of its stores and furlough 18,000 employees earlier this month as a result of public health measures.
CraftWorks is among several bankrupt retailers—including Modell’s Sporting Goods Inc., Art Van Furniture LLC, and Pier 1 Imports Inc.—scrambling to put their Chapter 11 plans on ice to survive the virus-related shutdowns.
The DIP loan from Fortress Credit Co. LLC will take the company through May 11 and will fund employees’ wages, benefits, and $1 million in health insurance claims. The budget doesn’t include rent amounting to $2.7 million per month on shuttered restaurants, CraftWorks’ attorney, Peter A. Siddiqui of Katten Muchin Rosenman LLP, told the court at a telephonic hearing Wednesday.
“We understand the hardship this places on the landlords,” Siddiqui said. But the company isn’t generating any revenue, and won’t be able to as long as restaurants stay closed, he said.
The company opted for the six-week financing rather than a 60-day stay under the bankruptcy code because it’s not certain when restaurants will be able to re-open, he said.
“We want to sell steak and beer and collect money to pay our creditors,” Siddiqui said. “We’re just not confident that we’ll be able to do that” in 60 days, he said.
Shannon asked CraftWorks to provide a status update in late April, before the temporary funding runs out.
“The world is drastically different from it was three weeks ago, and I think it would be good to know where the world stands three or four weeks from now,” Shannon said.
The Colorado-based restaurant operator—which also owns Old Chicago Pizza & Taproom, Rock Bottom Brewery, and Ale Works Restaurant & Taproom—filed for bankruptcy March 3.
The case is CraftWorks Parent, LLC, Bankr. D. Del., No. 20-10475, Hearing 4/1/20.
For additional legal resources, visit Bloomberg Law In Focus: Coronavirus.