Restructuring Sought by Restaurant Enterprises : Finance: Cash-strapped company hopes to avoid bankruptcy with debt-for-equity plan that would give bondholders an ownership interest in return for lower interest and a longer repayment schedule.

Seeking some relief from its long-term debt, Restaurant Enterprises Group Inc. said Wednesday that it will seek a restructuring that would give bondholders an ownership interest in the company in return for lower interest rates and a longer repayment schedule.

By regrouping its $282.6 million in bond debt, the Irvine-based operator of several restaurant chains hopes to stave off a bankruptcy filing. The process, however, could take several months as bondholders evaluate the proposal and decide whether the company’s equity offer is worthwhile.

REG also announced that W.R. Grace & Co., a Florida-based conglomerate that already controls 47% of the company’s stock, has signed agreements with more than 90% of the company’s management shareholders for an option on their shares as well. Management now owns 26% of the company; the rest belongs to “various outsiders,” a spokesman said.

REG President Norman Habermann said in a statement that Grace intends to exercise the option only if a restructuring plan is successful, ensuring that Grace could preserve its investment. Grace, he said, has no plans to become directly involved in the restaurant business.

“The successful completion of the company’s recapitalization plan would provide the company with the financial flexibility to build upon its strengths and thereby achieve its full potential,” Habermann said.

REG, based in Irvine, operates 592 restaurants in 24 states. They include Coco’s, Carrows, Reuben’s, Charley Brown’s and El Torito.

The proposed restructuring comes as the company is fighting a cash crunch so severe that it has been forced to suspend paying interest on the bonds until its sales rise and it can cut its costs. The bond payment was due Dec. 15. The company has told the Securities and Exchange Commission that it can come up with a plan that will keep it out of bankruptcy court.

The proposed debt-for-equity deal would affect holders of bonds in $1,000 principal amounts with interest rates of 12.25% and due in 1994 to 1996. The holders would receive $512.82 in principal on new 10% senior subordinated notes due in the year 2002, $256.41 of new 10.75% senior subordinated notes due in 2002 and 17.2 shares of common stock. The wrangling will probably come over just how much a share of equity in the company is worth as the bondholders evaluate whether they would receive a fair deal.

The plan, filed with the SEC, would give bondholders an 11.9% share of the new common stock. The company also said it wants to convert $159 million of redeemable preferred stock into common stock, representing 61% of the fully diluted shares.