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Quiznos Says It Exited Bankruptcy; Court Says Differently

Quiznos Cube
Covered Quiznos sign as flagship store shuttered. photo/bmm

DENVER – Quiznos issued a press release yesterday that declared Quiznos has successfully completed its financial restructure and has emerged from Chapter 11. But bankruptcy court documents show otherwise. 

While the U.S. Bankruptcy Court in Delaware filed an order on Tuesday stating that Quiznos’ May 12, 2014 plan for reorganization was approved yesterday by the court, a spokesperson for the bankruptcy hotline said that Quiznos is still in the process of emerging from bankruptcy. “Once they have emerged it will be public on our website,” he said. As of this morning, there was no such documentation that declared Quiznos has exited from bankruptcy proceedings. 

The troubled sandwich chain filed for bankruptcy March 14, 2014, after its systemwide sales shrank to such a level that it was unable to pay the interest on its $570 million debt. Trying to skirt around bankruptcy in 2012, Quiznos engaged private equity firms Avenue Capital Group and Fortress Investments to take over as majority stakeholders in order to restructure Quiznos’ untenable $860 million high debt load. After it was chiseled down and swapped for an equity deal, senior lenders voted in favor of a “pre-packaged” reorganization plan that would reduce Quiznos’ debt by more than $400 million.

The court on Monday issued another order. It extends the deadline date from June 26 to October 10, 2014 for Quiznos debtors to determine if civil action lawsuits related to the bankruptcy are appropriate for them. If some are found, the litigation would remove “without prejudice,” allowing cases to be re-filed. The judge said he granted their motion because it was in the best interest of the debtors, their creditors and all other parties of interest.

One such potential lawsuit was outlined by Reorg Research against Quiznos former owners during the bankruptcy filing last March. The report stated that an investigation had been conducted during the past nine months into alleged misconduct of Rick Schaden Management and Ownership Group that arose in connection with Quiznos’ 2012 restructuring under first-lien lenders Avenue Capital and Fortress Investment. The news firm that covers the distressed debt market reported, “There appears to have been a concerted effort to deceive other members of the debtors’ management, certain board members and then-existing lenders. And as a result, Avenue Capital and Fortress could have suffered material damage.”

Quiznos tries to comfort franchisees

Despite its non-emergence from Chapter 11 bankruptcy, Quiznos’ CEO Stuart Mathis sent out an email to franchise owners yesterday. “I am reaching out to you to share some exciting news. Today, we announced that Quiznos has successfully completed its financial restructuring and emerged from Chapter 11,” declared Matthis. The CEO said that today (Tuesday) marks the start of a new chapter for the company. “With our financial restructuring behind us, we now have a stronger foundation to execute our comprehensive plan to strengthen performance, revitalize the Quiznos brand and reinforce our promise as a fresh, high-quality and great-tasting alternative to traditional fast food offerings.”

Quiznos Cube company store with sign it is relocating
Company prototype store, called "The Cube", moves? photo/bmm

As always, Mr. Mathis committed Quiznos’ relationship with franchisees, saying they look forward to continuing to work with them.  “We believe our company and our franchisees are well positioned for future growth and success,” said the CEO.

Court records show that only Quiznos’ plan of May 12, 2014 to exit from bankruptcy had been approved yesterday. The actual exit date is uncertain. The court site Wednesday morning added, “The plan was substantially consummated.”

The debtors in the cases are QCE Finance; American Food Distributors; Quiznos Global; QCE LLC; QFA Royalties LLC; QIP Holder LLC; Quiz-CAN LLC; Quizno’s Canada Holding; QAFT, Inc.; Restaurant Realty; The Quizno’s Master; The Quizno’s Operating Company; National Marketing Fund Trust; The Regional Advertising Program Trust; and TQSC II LLC. The Debtors’ corporate headquarters are located at, and the mailing address for each Debtor is, 1001 17th Street, Suite 200, Denver, Colorado 80202.

As a side note, Quiznos moved its prestigious downtown headquarters last Friday to the Denver Tech Center (DTC). In advance to the move, the franchisor closed down its flagship restaurant known as “The Qube.” A bulletin in the window states they are moving the store to another location.


Related Articles:

AttachmentSize
QCE Order.pdf29.71 KB
Quiznos Order on Bankruptcy Extension.pdf86.18 KB
Quiznos Memo July 1 2014.pdf24.75 KB
Quiznos Ch 11 filing June 12 2014 deadline pushed.pdf91.91 KB
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