PAPA GINO’S RUNS OUT OF DOUGH
Owner files for bankruptcy, plans selloff
Citing a trending appetite for home delivery and increased competition for a bigger slice of the fast-food pie, the parent company of Dedham-based Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches filed for Chapter 11 bankruptcy protection yesterday, citing debt of more than $50 million in court documents.
PGHC Holdings Inc.’s voluntary petition was filed in the U.S. Bankruptcy Court in Delaware one day after its unceremonious shuttering of 92 restaurants and as precursor to Chief Financial Officer Corey Wendland's announcement that an agreement in principle had been reached to sell Papa Gino’s and D’Angelo to Wynnchurch Capital of Chicago.
Wynnchurch is a middlemarket private equity investment firm with $2.2 billion of committed capital under management. It specializes in restructurings.
PGHC’s court papers claim less than $50,000 in assets.
The company’s creditors include the Jimmy Fund for pediatric cancer care and research, which PGHC estimates it owes approximately $85,000 donated by customers through special meal promotions. Absent the court’s authority to honor that debt, PGHC said it could face “disastrous public relations and consumer relations consequences.”
PGHC said it had been toying with a “smaller, more efficient restaurant concept,” but lacked the funding to fully explore the idea.
The proposed sale of Papa Gino’s and D’Angelo's requires court approval; however, PGHC said it will solicit competing offers “to maximize the ultimate value of the sale, for both the company and its stakeholders.”
Sunday’s closings of 47 Papa Gino's restaurants and 45 D’Angelo locations put 1,100 people out of work, according to court documents, leaving 3,000 still employed at 100 remaining pizzerias and 78 sandwich shops across New England.
PGHC is seeking the court’s blessing to honor $1.6 million worth of gift cards that have been purchased, but not redeemed.
“These were hard decisions,” Wendland said, “but decisions we believe were absolutely necessary to allow Papa Gino’s and D’Angelo Grilled Sandwiches to continue serving New England now and for years to come.”
Among those waiting on payments from PGHC are the Hartford Life Insurance Co. and Brookside Mezzanine Fund II, which holds notes PGHC said matured June 1 and are now close to $40 million in arrears.
PGHC estimates that by the end of the month it will owe the state $1 million in meal and use taxes.
Papa Gino’s was founded in East Boston in 1961.
D’Angelo’s, formerly Ma Riva’s Sub Shop, has been in operation since 1967.
Yesterday’s bankruptcy filing will enable PGHC to maintain normal business operations while improving liquidity as it pursues the sale.