NEW YORK May 19 Sbarro Inc, the pizza chain often found in shopping mall food courts, received a U.S. bankruptcy judge's approval on Monday to move forward with a restructuring plan that will allow it to end its second bankruptcy in three years.
Judge Martin Glenn of Manhattan bankruptcy court signed an order approving a plan by Sbarro to cut its $148 million debt load by more than 85 percent, to about $20 million.
Founded in 1956, the Melville, New York-based Sbarro had tried to boost sales by revamping recipes to entice diners who increasingly favor "fast casual" chains such as Chipotle Mexican Grill Inc and Panera Bread Co.
But an "unprecedented decline in mall traffic" and an "unsustainable" balance sheet necessitated a restructuring, including the closure of hundreds of restaurants, the company said in court papers when it filed for bankruptcy in March.
Sbarro entered Chapter 11 with a so-called prepackaged restructuring that already had the backing of many of its creditors. In a parallel restructuring option, it also explored auctioning its assets but, drawing no bidders, went ahead with the prepackaged restructuring.
The deal will convert a chunk of Sbarro's loan debt into equity of the reorganized company, and save money through store closures and the rejection of certain leases. General unsecured creditors will receive about $1.25 million.
Sbarro previously filed for bankruptcy protection in 2011. (Reporting by Nick Brown; editing by Matthew Lewis)