Quaker Steak Bankruptcy Sale Hearing Is Tuesday
YOUNGSTOWN, Ohio – The sale of Quaker Steak & Lube’s assets to TravelCenters of America is on track for a smooth hearing Tuesday before U.S. Judge Alan M. Koschik despite remaining objections from a few creditors, including Cortland Savings and Banking Co.
Quaker Steak filed Chapter 11 bankruptcy Nov. 15 in combination with a $25 million asset purchase agreement with TravelCenters of America LLC, the Westlake-based operator of 252 travel centers and 204 convenience stores in 43 states.
TravelCenters is prepared to take over Quaker Steak’s operations as soon as the sale is closed, states its executive vice president and general counsel, Mark R. Young, in a declaration filed with the court. The company, which he described as “the largest publicly traded operator/franchisor of full-service travel centers in the United States,” had cash and cash equivalents on its consolidated balance sheet of approximately $127 million as of Dec. 31, Y” and net availability of approximately an additional $50 million under TA’s secured credit facility,” Young stated.
In July 2014, Quaker Steak, based in Sharon, Pa., hired a Texas investment banking firm, Mastodon Ventures Inc., to conduct a financial analysis and renegotiate its debt. Efforts followed to sell the chain, culminating in October with the TravelCenters asset purchase agreement as part of bankruptcy reorganization.
By order of the court, competing bids were solicited for the 53-store casual dining chain but none were received by the March 11 deadline, negating the need for an auction tentatively scheduled for March 16.
Although attorneys for Cortland Banks say they are not opposed to TravelCenters acquiring Quaker Steak’s assets, they want the bank to be paid in full when the deal is closed. In its limited objection filed March 17, Cortland says Quaker Steak owed the bank $3,119.501.21 as of Feb. 29 with interest accruing at $782.64 per day as well as additional professional fees and expenses.
At the time of the Chapter 11 filing, Cortland Banks was owed $2,616,564 on six equipment and mortgage loans going back to June 2011 and related to Quaker Steak opening restaurants in Boardman, Lakewood and Medina.
Cortland is one of four secured lenders that financed Quaker Steak’s two-year building boom from 2011 to 2013. Bankruptcy court documents show Farmers National Bank of Canfield was owed $1,702,465 in equipment and mortgage loans at the time of the filing, United Capital Business Lending Inc. $3,320,736 and Wells Fargo Bank $2,355,986.
The Official Committee of Unsecured Creditors has reached an agreement with Farmers, United Capital and Wells Fargo on how much each will be paid at closing, documents show. The committee’s sticking point with Cortland is the value of what’s termed the Medina real estate.
States Cortland Banks in its limited objection, “Based upon the record of the proceedings before the court, Cortland understood that the debtors’ loan obligations to Cortland would be paid in full from the sale proceeds, including the $1.4 million stipulated value of the Medina real estate.”
Attorneys for the bank argue that unsecured creditors retain the right to challenge the amount of Cortland’s reimbursement after the sale, and the bank “played a critical role in bridging the collateral gap [to enable] obtain debtor-in-possession financing to facilitate the going-concern sale [of Quaker Steak].”
If attorneys cannot reach agreement – before or during the hearing — on the value of the Medina property, the issue would be left for Judge Koschik to resolve.
Meanwhile it’s business as usual at Quaker Steak’s restaurants where the company’s current promotion is a $100,000 Bracket Challenge for the NCAA basketball tournament.
TravelCenters’ CEO, Greg Lippert, has said that the acquisition of Quaker Steak’s restaurants and its brand is integral to “help us fully realize our expansion goals.”
On March 14, TravelCenters reported a net loss of $1.6 million compared to net income of $34.3 million in the fourth quarter of 2014. Full-year net income of $27.7 million compare to $61 million in 2014.
The company attributes the declines to low fuel prices.
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