NEW YORK (Reuters) - Cookie retailer Mrs. Fields Famous Brands LLC said on Friday it plans to file for Chapter 11 bankruptcy protection to help restructure its business, according to a U.S. Securities and Exchange Commission filing.
The company, which licenses and franchises about 1,200 Mrs. Fields Cookies and TCBY frozen yogurt locations worldwide, has begun soliciting votes from creditors for a "prepackaged" bankruptcy reorganization plan.
Under a prepackaged plan, creditors vote on certain aspects of the plan prior to the bankruptcy filing in court.
More than two-thirds of its bondholders have agreed to vote in favor of the prepackaged plan, though their support is contingent upon the company submitting its bankruptcy filing to the court by August 25, according to the regulatory filing.
The company plans to continue doing business and has also hired Blackstone Advisory Services to explore a possible sale of TCBY, the largest U.S. retailer of soft-serve frozen yogurt with live active cultures, according to the filing.
Restaurant and food companies have struggled this year as higher gasoline prices and rising ingredient costs have eroded sales and profits. S&A Restaurant Corp, owner of the Bennigan's and Steak & Ale chains, filed for Chapter 7 liquidation in July, while Buffets Holdings Inc, the operator of Old Country Buffet and Ryan's steakhouses, filed for Chapter 11 bankruptcy protection in January, saying customers had cut back on discretionary spending.
"There are several food retailers right now that are mall-based that are under pressure," said Marti Kopacz, managing partner of the restructuring group at accounting firm Grant Thornton. "Food that is out of the home and food that is arguably discretionary is going to come under pressure when people don't feel that they've got that discretionary income in their wallets."
Mrs. Fields said in the regulatory filing it would have been unable to make an interest payment in September. The company, with about $196 million in publicly traded debt, said it struck a deal on Wednesday with its equity sponsor Capricorn Investors III LP to modify certain financial terms and revise timelines under the terms of their investment agreement.
Michael Ward, interim co-chief executive officer of Mrs. Fields Famous Brands, was not available to comment.
Mrs. Fields, based in Salt Lake City, Utah, was started in 1977 by Debbi Fields, a young mother who made cookies from scratch at her first location in Palo Alto, California. The company began franchising stores in 1990 and in 2000 it gained control of TCBY, which stands for "The Country's Best Yogurt," through a $140 million cash buyout with Capricorn.
The company has struggled with declining sales throughout the past year. In two separate transactions since 2007, the company sold its Pretzel Time, Pretzelmaker and Great American Cookies brands to NexCen Brands Inc for more than $100 million in cash and stock.