The pizza chain Sbarro LLC has filed for bankruptcy protection for the second time in three years after struggling with too much debt and changing consumer tastes that led to fewer customers in the malls that house many of its restaurants.
Lenders would take control of the Melville, New York-based company under a "pre-packaged" reorganization, which Sbarro on Monday said would allow a "quick exit" from Chapter 11.
Sbarro expects to cut its debt load by more than 80 percent, including by eliminating $140 million of secured debt, and said lenders representing nearly all its debt backed the restructuring. The company will invite other buyers to submit better offers.
Founded in 1956, Sbarro had tried to boost sales by revamping its recipes to entice diners who increasingly favor "fast casual" chains such as Chipotle and Panera Bread.
The closely-held company has also been closing poorly performing restaurants, and, according to Moody's Investors Service, has been facing high food, labor and occupancy costs.
Last month, Sbarro said it would shut 155 of the roughly 400 restaurants it owns in North America. The company still has more than 800 restaurants in over 40 countries. Its bankruptcy does not affect 600 restaurants owned by franchisees.
"Sbarro has been stuck with an outdated business model," said Michael Whiteman, a restaurant consultant and president of Baum & Whiteman LLC in Brooklyn, New York. "Its biggest shortcoming is that it sells food that has been sitting out for a while, and more people want food made to order."
Sbarro was founded in Brooklyn by Gennaro and Carmela Sbarro, a married couple who had immigrated from Naples, Italy.
It expanded in the New York City area before launching in 1967 its typical restaurant format, which includes an open kitchen and lets customers serve themselves.
Sbarro and 33 affiliates filed for protection from creditors with the U.S. Bankruptcy Court in Manhattan, court records show.
The company has between $100 million and $500 million of both assets and liabilities, according its bankruptcy petition.
"I don't know that it has a sustainable business over the longer term," Whiteman said. "The way to turn the company around in the short haul is to get out of money-losing leases and close stores, which it has been doing."
Sbarro previously filed for bankruptcy protection in April 2011, and emerged from Chapter 11 the following November.
The case is In re: Sbarro LLC, U.S. Bankruptcy Court, Southern District of New York, No. 14-10557.
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