Mrs. Fields’ Original Cookies said the U.S. Bankruptcy Court confirmed its Chapter 11 reorganization plan, providing it with a $10 million, three-year senior term credit facility from certain note holders. It will issue its first publicly traded stock as part of the plan.
In the reorganization, the cookie maker will use the credit line, in conjunction with cash flow from normal operations, to support the company’s ongoing operations and working-capital needs. Mrs. Fields, which now has about $196 million in public bonds, is boosting its balance sheet by exchanging bondholder debt for cash, new bonds, and a controlling equity stake in the reorganized company.
According to Bloomberg News, Mrs. Fields will exchange the bondholder debt for $87.5 million in cash, $52.5 million in new notes, and the controlling equity stake. Capricorn Investors III LP, which holds a $6.5 million note, will receive the remaining 12.5 percent of the new stock, according to the wire service. It noted that the expected recovery is 96.4 percent.
“The noteholders are fully supportive of the plan,” Fred Hodara, attorney for the noteholders, reportedly said in court.
According to Bloomberg, court papers show that five of the company’s noteholders, which hold 60 percent of the notes’ value, agreed to loan the company as much as $10 million to fund its reorganization.
The reorganization plan was approved just 40 days after the company filed its prepackaged bankruptcy petitions. The company said that it believes the plan will give it a stronger balance sheet, and cash to fund both operations and growth its business units: franchising, gifting, branded retail, and licensing.
On June 5, Mrs. Fields submitted a regulatory filing saying that it was seeking creditor support for a “prepackaged” Chapter 11 bankruptcy. At the time, the company announced that it had signed a binding restructuring agreement with a group of investors holding Mrs. Fields’ 9 percent and 11.5 percent senior secured notes due in 2011 that offered to exchange those notes for cash, new secured notes, and 87.5 percent of the equity in the company.
The company subsequently announced several delays and renegotiations of the terms of that restructuring agreement. On Aug. 13, Mrs. Fields said it had reached an agreement with equity sponsor Capricorn, along with an ad hoc committee of bondholders, to modify terms of its restructuring agreement, although it said in its latest filing that its prepackaged bankruptcy still has the support of those investors. On Aug. 15, it finally said it planned to file for bankruptcy.
The company has more than 1,200 franchised and licensed Mrs. Fields Cookies and TCBY outlets.