Competing plans
Creditors expected to urge sale of chain
Flying Star’s owners, their creditors have differing ideas on how to handle the chain’s reorganization
Flying Star’s owners have filed a reorganization plan in U.S. Bankruptcy Court that would allow them to retain control of the restaurant chain they built in exchange for surrendering their own claims against the company and putting up $1.5 million in new capital to pay off creditors.
But their creditors are working on their own competing plan that would mean selling the restaurant chain to another local firm.
Flying Star owners Jean and Mark Bernstein filed their reorganization plan in court late Friday. Under their plan, the Bernsteins would bid $1.5 million for new shares of stock in the company and continued management. The infusion would allow Flying Star to pay taxes and other priority claims immediately, pay other creditors, like lenders, in full on an installment basis, and pay the unsecured creditors a total of $790,101. That amounts to 21.5 percent of the unsecured creditors’ $3.67 million in claims, according to the filing.
The attorney for Flying Star’s unsecured creditors committee said earlier Friday — before the Bernsteins filed their plan — that he was working on a “competing plan” based on Southwest Brands’ indication that it wanted to buy Flying Star for $2.5 million. Attorney Paul Fish said the creditors’ plan will involve putting the chain out to auction, with an agreement from Southwest Brands that it would bid $2.5 million.
The dollar figure disparity is due in part to the Bernsteins’ paying $1.5 million on top of the secured claims, while the $2.5 million from Southwest Brands would have to be used in part to settle secured claims, though Fish believes the latter would still mean more money for creditors.
Southwest Brands owns Keva Juice and Garduño’s, the latter of which it purchased out of bankruptcy.
Southwest Brands President Tug Herig declined to confirm the $2.5 million amount to the Journal on Friday, but said that the company remains interested in purchasing Flying Star with the intent of keeping it in business.
“Southwest Brands is considering pursuing this, and we are working with Paul Fish and the attorney for the creditors and devising a plan that will work,” he said.
Fish said he hoped to file the creditors’ plan within 10 days.
The Bernsteins’ attorney declined to comment on the creditors’ plans.
A judge must approve any proposed plans’ associated disclosure statements, at which point the creditors can vote on them.
Under the creditors’ plan, Fish
said the creditors would also retain certain claims against the Bernsteins and their other companies, such as Satellite Coffee and their real estate company.
Fish this week filed a motion asking the court’s permission to “bring claims” against such “insiders.” Satellite Coffee owes Flying Star “a large amount,” according to the motion. The Bernsteins’ real estate company, meanwhile, had charged Flying Star “excessive rent,” the document states.
Under the Bernsteins’ plan, the court would determine how much money Satellite owes Flying Star, and Flying Star would try to collect and distribute the net proceeds to unsecured creditors.
Flying Star filed for Chapter 11 bankruptcy in January 2015, immediately shutting down two of its stores. It shuttered a third last fall. It currently has six locations, all in Albuquerque.
According to its filing, the restaurant chain’s monthly receipts have averaged $1.48 million in receipts and $1.47 million in disbursements since June 2015, for a net profit of $4,119.