Cosi Inc. recently announced that it had filed for Chapter 11 bankruptcy protection, according to Reuters. The upscale fast food chain cited substantial losses in recent years, which prompted the company to pursue a sale of its remaining assets.
Cosi ends up insolvent after struggles
In its bankruptcy documents, the chain claimed that consumer traffic to its fast food locations had fallen significantly in recent years because it failed to adjust to market trends. According to USA Today, following this steep decline, the company had removed its CEO and closed 29 of its 74 chain locations across the country with over 450 workers laid off. The company also listed $15.7 million in net losses on revenues of $88.9 million last year, with another $3.1 million lost this year on $22.3 million in sales through the second quarter.
In turn, its stock collapsed over 63 percent this year, including a recent 1.3 percent drop in recent days. The USA Today reported that as a result, the company listed $31.2 million in assets with $20 million in liabilities.
The reorganization plan for Cosi Inc
Cosi stated in its court papers that it negotiated a sale agreement with its lenders AB Opportunity Fund LLC, AB Value Partners LP and Milfam II L.P. to serve as the stalking horse bidder in its asset auction. Forbes reported that these lenders will set the lowest bids on all of Cosi’s assets. However, the deal is still in question due to a conflict with debtors regarding a collateral deal. In addition, as part of this deal, these creditors will provide $4 million in debtor-in-possession financing to keep the company’s core business and its franchise locations open.
Meanwhile, the plan is to use this funding to provide liquidity to maintain operations during the bankruptcy process.