Creditors Pursue Plan to Save Ranch Markets
Unsecured creditors of Irvine Ranch Farmers Market agreed Tuesday to pursue negotiations with Chalet Gourmet--a Los Angeles upscale grocery store--to bail out Irvine Ranch from bankruptcy reorganization.
The management of Chalet Gourmet and their investment bankers have proposed a debt-for-equity deal under which the unsecured creditors would get a minority ownership share of the Costa Mesa-based market company. The arrangement was proposed to a committee of unsecured creditors on Tuesday.
“Boys (Markets) isn’t the only one in the game now,” said Ronald Rus of Orange, who represents the unsecured creditors’ committee. Rus was referring to an agreement in principle reached last week with American Breco Co., the owner of Boys Markets, to pay $5 million in cash for three Irvine Ranch stores.
15 Cents on the Dollar
The attorney explained that the sale to American Breco would pay the unsecured creditors about 15 cents to 25 cents on the dollar. The unsecured creditors are owed a total of $15 million.
“We think the Boys’ offer is so minimal--as far as return to creditors--that the creditors are willing to risk that return” for the potential of a bigger return further down the line, he said.
The 20-year-old Irvine Ranch chain, which has 10 Southern California stores--filed for protection from creditors last July in U.S. Bankruptcy Court in Santa Ana, which must approve any sale or reorganization of the chain.
The potential agreement with Chalet Gourmet’s management eventually could pay as much as 100 cents on the dollar, Rus said.
Under the proposal suggested to the unsecured creditors’ committee on Tuesday, Chalet Gourmet first would come in as a lender, immediately infusing $2.6 million into Irvine Ranch and assume operational control. Eventually, the Chalet Gourmet group would become the majority owner of Irvine Ranch, and invest additional “substantial” funds in the chain, Rus said.
Jointly Owned
Jon Hubbard, the Irvine Ranch chain’s founder, would lose his ownership of the company. Instead, it would be jointly owned by the Chalet Gourmet group and the unsecured creditors.
“It would be a turnaround, not a buyout,” said Marc Winthrop, bankruptcy attorney for Irvine Ranch.
Rus added: “We think the amount that American Breco is offering is so small, it’s worth the gamble.”
The unsecured creditors’ committee voted Tuesday to continue negotiations later this week with Chalet Gourmet.
