NEW YORK Burger and ice cream chain Friendly's is close to filing for bankruptcy and may try to sell itself at auction, the Wall Street Journal reported on Thursday.
The Wilbraham, Massachusetts-based restaurant chain may file for bankruptcy as early as next week and is in talks with Wells Fargo & Co (WFC.N) on a $70 million loan to keep it afloat during the process, the Journal reported, citing sources familiar with the matter.
A spokeswoman for Friendly's said the company has a policy of not commenting on rumors, but added in an email to Reuters:
"Like many restaurant chains, we are feeling the impact of the economic downturn and rising commodity prices and a challenging marketplace. We are working with our lenders, board and management team to explore alternatives to strengthen our financial base."
Calls to Friendly's owner, Sun Capital Partners Inc, were not returned on Thursday.
A spokeswoman for Wells Fargo declined to comment on the report.
According to the report, under bankruptcy, Friendly's would roll some of its existing debt into a new loan from Wells Fargo. The loan would also include $25 million in new funds. Friendly's would seek an auction to sell itself out of bankruptcy, the report said.
Friendly's has retained law firm Kirkland & Ellis and turnaround firm Zolfo Cooper, the Journal said. Calls to both firms were not returned Thursday.
Friendly's would be the latest in a number of restaurant chains, including Sbarro, Fuddruckers and Charlie Brown's Steakhouse, to file for bankruptcy because of the economic downturn and a drop in consumer spending.
Sbarro is currently in bankruptcy in New York, where it will either sell itself to the highest bidder or restructure the bulk of its $395 million debt load.
(Reporting by Nick Brown and Nick Zieminski; Editing by Gary Hill)