Struggling Quiznos sandwich chain working with creditors on debt restructuring

Quiznos at 1275 Grant Street in Denver is the franchise's first chain. (Kathryn Scott Osler, Denver Post file)

The Quiznos sandwich chain plans to ask creditors to support a debt-restructuring deal hammered out with other big lenders or face the prospect of a Chapter 11 bankruptcy-protection filing, people familiar with the matter told Dow Jones Newwires.

Denver-based Quiznos, struggling amid slumping sales and a recent violation of debt terms, reached a deal to hand ownership to Avenue Capital Group, the hedge fund controlled by billionaire Marc Lasry, the people said.

Avenue would convert debt to equity and invest cash in Quiznos as part of a tentative deal, they said, giving the hedge fund more than a 70 percent ownership stake in the chain.

The plan would reduce Quiznos's roughly $875 million in debt by about $281

million. Quiznos plans before the end of the year to ask other creditors to support the deal or force them to go along with it in a prepackaged bankruptcy, the people said. Creditors will have about 30 days to decide whether to accept the deal.

The deal requires creditors to forgive debts and push out due dates on obligations, depending on the circumstances. They could fare worse if Quiznos filed for bankruptcy protection. Senior lenders would likely get less of their debt paid back, and other creditors would end up owning less of Quiznos if the deal gets done in bankruptcy court, the people said. Spokespeople for Quiznos and Avenue declined to comment.

Quiznos' owners, private-equity firm CCMP Capital Advisors LLC and Consumer Capital Partners, an investment firm owned by Rick Schaden, aren't likely to get any recovery on their investments, the people said.

A representative for Consumer Capital had no immediate comment. A CCMP spokeswoman declined to comment.

Lasry of Avenue, like other distressed-debt investors, often tries to gain control of troubled companies by purchasing discounted debt and later converting it to equity, which carries more risk but also the potential for greater reward.

In the wake of the financial crisis, he's led investors gaining control of three Atlantic City, N.J., casinos bearing Donald Trump's name and broadcaster ION Media Networks Inc., among other companies. Avenue also sometimes writes equity checks to bolster ownership stakes in firms it is in the process of acquiring through debt holdings.

Source: http://www.denverpost.com/breakingnews/ci_19593686?source=rss

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