Baton Rouge-based Piccadilly Restaurants LLC reported the company has filed for protection from its creditors under Chapter 11 of the federal bankruptcy code to head off “an aggressive legal maneuver” by its lender, New York-based vulture fund Atalaya Capital Management.
Tuesday’s filing was unexpected but unavoidable due to Atalaya’s litigation, Piccadilly Chief Executive Officer Thomas J. Sandeman said in a news release.
Piccadilly made its Chapter 11 filing in the U.S. Bankruptcy Court in Lafayette. In the filing, Piccadilly alleges that Atalaya started a lawsuit in state court to appoint a receiver.
Piccadilly says that in April Atalaya bought secured debt -- $6.9 million on a revolving credit, $2.9 million on letter of credit and $16 million on a term loan.
On Sept. 5, Atalaya filed a lawsuit in 19th Judicial District Court seeking its money, permission to seize Piccadilly’s property in East Baton Rouge and Jefferson parishes and asking the court to appoint a keeper of Piccadilly’s property.
Atalaya recently bought part of Piccadilly’s debt, but last week, debt restructuring talks broke down, according to Piccadilly. However, Piccadilly said it has secured a commitment for $5 million in financing , providing the company with ample liquidity.
Piccadilly said the current recession has hurt the company’s performance, but the company continues to produce positive EBITDA results, or earnings before interest, taxes, depreciation and amortization. The company said that within the last year it had doubled sales of its food division, with customers including schools and emergency food providers.
“The filing will help ensure a continuation of the Piccadilly brand, provide future employment to our employees and not disrupt service to our customers in any way,” Sandeman said in a news release.
In its Chapter 11 filing, Piccadilly said it owes between $10 million and $50 million to its creditors. Those debts include $4.1 million to Merchants Foodservice, a Hattiesburg, Miss., provider of fresh and frozen produce; $407,285.29 to Peter Mayer Advertising of New Orleans; $151,382.20 to Ecolab Inc. of Chicago for repairs and maintenance; $110,568.35 to Capital City Produce of Baton Rouge for fresh and frozen produce.