Investor Group to Buy Control of Irvine Markets

In a surprise move, an investor group headed by the owner of Chalet Gourmet grocery in Los Angeles has stepped in to buy controlling interest in Irvine Ranch Farmers Market, now in bankruptcy court proceedings.

In an agreement in principle reached late Monday, the investor group has agreed to immediately invest more than $2.6 million into the Irvine Ranch chain, attorneys for both companies said Monday. In return, the investors would get a controlling majority interest in Irvine Ranch, along with control of the chain’s operations and management.

Such a plan must first be submitted to creditors and to the federal bankruptcy court for approval.

The agreement between Chalet Gourmet and Irvine Ranch ends an agreement in principle reached early this month between the beleaguered upscale grocery chain and American Breco, the company that owns Boys Market, according to Marc Winthrop, attorney for Irvine Ranch.

Century City-based American Breco had offered to pay $5 million in cash for three Irvine Ranch stores--an agreement that would pay unsecured creditors about 15 cents to 25 cents on the dollar, bankruptcy attorneys in the case said. According to a statement by Chalet Gourmet, the deal with Boys fell apart on Sunday.

The new investment group is headed by Daniel Bobroff, owner of Chalet Gourmet, an 8,000-square-foot store on Sunset Boulevard. He is joined by HLHZ Capital of Los Angeles, a financial-restructuring group that is an arm of Houlihan, Lokey, Howard & Zukin, a national financial-advisory group.

“We believe our group has the financial and operational capabilities to implement a reorganization that preserves the integrity of Irvine Ranch,” said Irwin Gold, associate director of HLHZ Capital.

One key difference in the two deals is that while American Breco would buy only up to five stores, the Chalet Gourmet group anticipates becoming majority owner of the entire chain.

“It’s apples and alligators,” Winthrop said of the two proposals. “The Breco approach was to purchase assets for cash. The proposal by the Chalet Gourmet interests is intended to reorganize the company as a going concern so it emerges more or less intact.”

Bobroff would become the new president of Irvine Ranch, effective immediately, sources said Monday. Industry sources credit him with rescuing Chalet Gourmet from bankruptcy two years ago. Bobroff could not be reached for comment.

Winthrop said that under the agreement, the chain would keep the Irvine Ranch name. It would include an employment contract for Irvine Ranch founder Jon Hubbard, who would concentrate on produce marketing and merchandising the stores.

But an attorney for unsecured creditors, Ron Rus, said Hubbard’s “fairly lucrative employment contract” could be a sticking point for the creditors’ committee. Rus added that two other investor groups have expressed interest in buying some Irvine Ranch stores and that a hearing on the proposals will be held today in federal bankruptcy court.

The 20-year-old Irvine Ranch chain, which has 10 Southern California stores--filed for protection from creditors in July in U.S. Bankruptcy Court in Santa Ana, listing liabilities of $17.5 million.

Peter Sodini, president and chief executive of Boys, could not be reached for comment Monday. But according to Winthrop, American Breco “substantially changed (financial terms of) the deal since (we) initially agreed.” Winthrop added that unsecured creditors now “could anticipate getting far more than they would have gotten under the Breco deal.”