A federal bankruptcy court judge has approved a reorganization plan for Piccadilly Restaurants that puts the cafeteria chain’s ownership in the hands of New York investment firm Atalaya Capital Management.
The chain was owned by California-based Yucaipa Cos.
Piccadilly originally sought the bankruptcy court’s protection in a September 2012 filing in Lafayette. The move came after Atalaya attempted to seize the chain’s assets in a Baton Rouge district court. At the time, Piccadilly owed the New York investment firm about $26 million and had not made a payment in more than a year.
Neither Atalaya nor Piccadilly officials could be reached for comment Thursday or Friday.
With the Piccadilly debt growing to $37 million, Atalaya’s plan — supported by Piccadilly’s unsecured creditors — called for Piccadilly to issue two notes totaling $28 million to cover most of the debt to Atalaya. The remaining $9.1 million would be converted into 100 percent ownership of the cafeteria chain.
Piccadilly and Yucaipa Cos. objected to the Atalaya plan, bankruptcy court records show.
“Atalaya has awarded itself a windfall. It will convert $9 million of debt in exchange for equity worth at least $19 million,” Yucaipa said in its objection.
The Atalaya plan also gave Yucaipa nothing for its ownership.
Yucaipa had filed its own reorganization plan in July. That plan called for putting Piccadilly’s assets into a newly created holding company and negotiating new lending agreements with Atalaya.
However, bankruptcy court Judge Robert Summerhays approved the Atalaya plan, according to a filing dated Thursday.
Piccadilly was founded in 1944 in downtown Baton Rouge. The company chain grew steadily, reaching 40 restaurants in 1971 and going public in 1979.
But the chain’s fortunes faded and expansion efforts through acquisitions failed to change Piccadilly’s fortunes. In 2003, Piccadilly filed for Chapter 11 bankruptcy protection. At the time, the company had 175 restaurants. In 2004, Yucaipa took Piccadilly private, buying the company for $80 million.
But the restaurant chain’s troubles weren’t over. In 2012 Piccadilly again asked a bankruptcy court for protection from its creditors. At the time, Piccadilly had more than 80 locations. It also was putting greater emphasis — with 70 locations in place — on a food service division it formed in 2005. It was designed to capitalize on Piccadilly’s brand name by providing meals for the employees, students or residents of companies, manufacturing plants, universities, private schools and senior living centers.
During its reorganization, Piccadilly shed a number of underperforming locations — dropping to 61 locations now on its website — and further emphasized service to institutional customers, now up to 80 locations. But the company continued to lose money. Between November 2012 and December 2013, the chain lost $13.8 million, an average of close to $1 million a month, according to the most recent operating report filed with the court.