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Carrows' Parent Seeks Chapter 11 Protection

February 15, 2001|MARC BALLON | TIMES STAFF WRITER

The operator of Coco's and Carrows restaurants, struggling with debt and sagging sales, said Wednesday that it has filed for bankruptcy protection.

FRD Acquisition Co. filed a bankruptcy petition after deciding not to make a $9.8-million payment on $167.6 million in debt securities.

Bankruptcy protection will allow FRD to restructure its debt and suspend additional interest payments, making the Irvine chains more attractive to buyers, said David Devoy, president and chief financial officer.

"No buyer would want to take on" that debt, he said.

The Chapter 11 bankruptcy filing listed assets of $218.8 million and liabilities of $330.1 million, including the $167.6 million in notes, which carry a 12.5% interest rate and are due in 2004.

FRD's parent, Advantica Restaurant Group Inc. of South Carolina, put Coco's and Carrows on the block last February to focus on Denny's restaurants, its core chain. Advantica had hoped to complete a sale by the end of last year but now hopes to dispose of them by the end of this year, Advantica spokeswoman Karen Randall said.

The company is negotiating with several possible buyers, she said, although she refused to reveal their names.

Although FRD has missed a bond payment, it has enough money to continue operating normally, paying vendors and employees on time, the company said.

Advantica bought Coco's and Carrows in 1996 for $306 million. But the two chains, with a total of 622 company-owned and franchised restaurants, many in California, have been a drain on the parent company.

Randall Hiatt, a Costa Mesa restaurant consultant, estimated that Coco's and Carrows together would fetch $100 million to $115 million. The chains are facing increasing pressure from fast-food restaurants and funkier chains such as Chili's.

Advantica shares fell 2 cents on Wednesday to close at $1.01 in over-the-counter trading.

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Bloomberg News was used in compiling this report.

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