Restaurant operator Buffets Inc BUFFTS.UL filed for a pre-arranged bankruptcy on Wednesday citing an "unsustainable debt burden," marking its second bankruptcy in four years.
The company filed for bankruptcy a second time weighed down by debt, its inability to close as many restaurants as it wanted due to lease restrictions, and a weak economy, Buffets' spokesman Nathan Riggs told Reuters by phone.
Buffets said it reached an agreement with its senior lenders to recapitalize the company and eliminate almost all of its $245 million outstanding debt.
Riggs added that the company had reduced its debt to $240 million from about $940 million after its first bankruptcy filing.
The pre-packaged plan will see the company's existing lenders receive 100 percent of its new common stock upon emergence from the bankruptcy process, Buffets said in a statement.
The restaurant operator also said it will close 81 underperforming restaurants and expects to emerge from bankruptcy within six months.
Buffets, which is controlled by Credit Suisse and a group of lenders, had first filed for bankruptcy protection in 2008, and emerged from it a year later.
The company's latest restructuring agreement is similar to the one bankrupt restaurant chain operator Friendly Ice Cream Corp FRN.UL reached with its creditors. The agreement allowed Sun Capital Partners Inc, which owned Friendly before it filed for bankruptcy, to buy the company's assets.
"The important step we're taking today is the culmination of the strategic alternatives review that our Board of Directors initiated in May 2011," said Chief Executive Mike Andrews.
The filing is the second "Chapter 22" petition in the past week, following Hostess Brands, which landed back in bankruptcy for the second time in less than three years.
Buffets, which operates 494 restaurants under brands like HomeTown Buffet, Ryan's and Fire Mountain, said it will receive a $50 million bankruptcy loan, known as debtor-in-possession or DIP finance, to fund operations while in court protection.
The case is in re: Buffets Restaurant Holdings Inc, U.S. Bankruptcy Court, District of Delaware, No. 12-10237.
(Reporting by Tanya Agrawal & Chris Jonathan Peters in Bangalore; Editing by Supriya Kurane, Roshni Menon)