Cosi closed 29 of its 74 company owned restaurants before filing for bankruptcy. Thirty-one franchised locations are unaffected by the filing.
“This was a difficult step, but it was necessary to address our liquidity issues,” Patrick Bennett, Sr., interim CEO of Cosi, said in a statement. “Cosi’s core business and franchise base remain intact, and we filed with the liquidity resources necessary to carry out the restructuring plan.
“We believe this process will allow the company to right-size its balance sheet, reduce its debt, and focus on improving the business and stabilizing the brand.”
Mark Demilio, chairman of the board, explained in a statement that Cosi “…worked very hard to avoid this step.”
He said the company tried to focus on improving sales, reducing costs and leaving unprofitable locations while exploring multiple options for raising cash. Demilio said the company looked into equity and/or debt in either public or private transactions; selling the company outside the bankruptcy process and selling certain company assets, among other possible transactions.
“It’s become clear that, despite the extensive efforts by the company, no such transactions are achievable at this time, that the company cannot continue to operate in its current financial condition, and that the best alternative for the company and its creditors would be to accomplish a sale through the bankruptcy process,” Demilio said.
Cosi entered into a non-binding term sheet with its lenders — AB Opportunity Fund LLC, AB Value Partners, LP and one or more entities affiliated with Milfam II LP — in which the DIP lenders proposed to purchase substantially all of Cosi’s assets as the “stalking horse” bidder. The transaction is subject to court approval.
The petition can be found at United States Bankruptcy Court for the District of Massachusetts, Case No.: 16-13704.