People apparently don’t eat pizza when it is snowing… Or during an economic recovery… And certainly not when celebrating the market’s all time high 5 year bull “market” anniversary.
That is the conclusion one can derive from the just filed Sbarro Chapter 11 bankruptcy filing, which just happens to be the company’s second in three years after it did the same in April 2011. The filing itself, which lists assets and liabilities between $100 and $500 million, is not surprising following on the heels of the announcement last month, when Sbarro said it would close 155 of 400 North American restaurants to cut costs. The reason for the Chapter 22 as it is known in restructuring circles: too much debt (so… debt isn’t wealth?) and declining customer traffic, which like in the McDonalds’ case has nothing to do with a cash strapped US consumer, but the nagging fear, which came true in January, that it would snow during the winter. Oh, and there is also no inflation, even though as Moody’s warned in January, Sbarros was striggling with “high food, labor and occupancy costs.”
But fear not: your favorite neighborhood Sbarro outlet will likely not be shutting down – a typical misunderstanding when bankruptcy is involved – as a $20 million DIP loan has already been arranged according to Bloomberg which will fund ongoing operations, and after $140 million in debt is eliminated, along with the existing equity of course, the company will return to operating its stores, albeit under new equity ownership.
Finally, none of the 600 or so worldwide franchises will be affected.
Full filing below.