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Unnamed sources have reported to the Wall Street Journal that Quiznos will file Chapter 11 bankruptcy protection, if it doesn’t work out a deal with its new hedge fund partner.
Under the restructuring, Avenue Capital Group plans to covert its debt into equity and invest cash in Quiznos, an Inside Real Estate News report said last Thursday. The hedge fund now owns more than 70 percent of Quiznos.
The deal would cut its debt load to about $281 million from $870 million. Creditors have about 30 days to decide whether to accept the deal or face a pre-packaged bankruptcy, sources told WSJ.
One sticking point is that Quiznos wants to cut its rent in its headquarters in downtown Denver.
The company plans to pay its landlord some money in consideration for reduced rent . . . But if the landlord doesn’t agree, Quiznos would reject the lease in bankruptcy proceedings.
Quiznos moved its headquarter to an exclusive business district in Denver in 2008, while it was battling in court with franchise owners across the country in four class action lawsuits. The franchisor signed a lease for 91,000 square feet, including its glass-encased flagship store, known as the “Qube,” built on ground level.
In early 2011, Quiznos began an employee reduction plan, laying off 140 corporate employees.
At the time the lease was signed, Rick Schaden, titled as the founder of Quiznos, told Wall Street Journal:
Denver has served as Quiznos’ home since its inception and has played a key role in supporting our widespread growth. We remain committed to the city as Greg [Brenneman, then Quiznos’ CEO] and his management team take Quiznos to the next-level growth of brand success.