BRIEF-Fidelity Southern Corp names Charles Christy as CFO
* Current CFO Stephen H. Brolly will continue to serve company as an officer in Fidelity Southern and Fidelity Bank Source text for Eikon: Further company coverage:
* Friendly's To close 63 weaker restaurants
* 424 restaurants to stay open for business
* Plans sale to a unit of current owner Sun Capital (Adds details and background, expert comment, byline)
By Tom Hals
Oct 5 Friendly's, an ice cream parlor chain known for its Happy Ending sundaes, filed for bankruptcy on Wednesday as the sluggish economy and slow consumer spending claimed another casual dining operator.
Friendly's Ice Cream Corp blamed rising prices for cream and high rents for its problems. The company, which operates or franchises restaurants in the eastern United States, plans to close 63 of its weaker restaurants; 424 will remain open.
The company, in its Chapter 11 bankruptcy filing, said it intends to sell the business to an affiliate of its current owner, Sun Capital Partners Inc. A restructuring expert said the planned sale was a sign of confidence in the long-term business.
Friendly's has struggled to cut prices to lure back recession-weary families who prefer cheaper counter-service chains.
The company's debt load also prevented it from sprucing up its restaurants, which got their start in Springfield, Massachusetts, in 1935.
"It's horrible," Gene Baldwin, a turnaround specialist with CRG Partners, said of the quality of Friendly's restaurants. "The facilities are terrible and need to be redone."
Friendly's and other restaurant chains that were built on traditional American fare and hearty meals have struggled to keep up with shifts in consumer tastes.
"It's a comfortable place for families, but we do actually have people watching calories and fat," said Jerry Mozian, a restructuring adviser with Tatum LLC.
Sit-down casual dining operators have been hit hard this year. On Tuesday another Sun Capital investment, Mexican restaurant operator Real Mex Restaurants [REALM.UL], filed for Chapter 11 bankruptcy. [ID:nL3E7L417S]
Other casual dining bankruptcies this year include Perkins & Marie Callender's Inc, Fuddruckers and Charlie Brown's Steakhouse.
Harsha Agadi, Friendly's chief executive, said in a statement the bankruptcy would "quickly improve our financial position and ensure we have the resources to build a better and stronger Friendly's."
Sun Capital likely sees the bankruptcy as an opportunity to quickly close weaker restaurants while holding onto the potentially lucrative franchise business, said David Pauker of Goldin Associates LLC, a turnaround advisory firm.
"It's likely that Sun believes that the crisis in consumer confidence which has reduced revenues in the casual dining sector cannot continue indefinitely," he said.
Friendly's said it received a commitment for about $70 million in financing. Along with cash flow, this will provide the working capital needed to meet its obligations during the restructuring, it said.
Friendly Ice Cream Corp listed both liabilities and assets of $100 million to $500 million.
The case is in re: Friendly's, Case No. 11-13167, U.S. Bankruptcy Court, District of Delaware. (Reporting by Tom Hals in Wilmington, Delaware; additional reporting by Sakthi Prasad in Bangalore; editing by John Wallace)
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