Fortress offers takeover of 127 Buffets restaurants

By Emily Chasan

NEW YORK (Reuters) - An affiliate of Fortress Investment Group Inc (FIG.N: Quote, Profile, Research, Stock Buzz) offered on Monday to take over 127 restaurants from bankrupt restaurant operator Buffets Holdings Inc, according to a court filing.

Buffets, operator of the Ryan's and Old Country Buffet chains, has asked the U.S. bankruptcy court in Delaware whether it can reject a master lease owned by the Fortress affiliate on 127 Ryan's restaurants and close the stores.

In the filing, Fortress said it believes the restaurants generate $40 million a year in cash flow, after rent expenses, making those stores "the strongest of the Ryan's locations."

Fortress said it would rather take over the operations than have Buffets reject the lease and shut down the restaurants.

Buffets, the largest U.S. steak-buffet restaurant company, filed for Chapter 11 bankruptcy protection from creditors in January, saying core customers had cut discretionary spending.

A spokesman for Buffets declined to comment on the Fortress filing, but Buffets said earlier this month that it believed the master lease was "onerous," and provided few options for poorly performing restaurants.

The 127 restaurants covered in the master lease represent about half of the restaurants Buffets acquired in 2006 when it bought Ryan's for $876 million, including debt.

They also represent about one-fifth of the 569 restaurants that Buffets runs in the United States.