Former Restaurant Enterprises Group Sells Bonds

As part of its bankruptcy reorganization, the former Restaurant Enterprises Group sold $450 million in bonds Wednesday in order to retire old debt and pay for the acquisition of 237 Chi-Chi’s Mexican-style restaurants.

The bonds carried a higher-than-normal interest rate because they were non-investment grade. Investor interest in riskier bonds is stronger these days because the securities pay higher returns than comparable fixed-income securities.

Last month, a Delaware bankruptcy court approved the Irvine-based restaurant company’s reorganization plan and its bond sale. The company changed its name to Family Restaurants Inc. and will end up with 682 full-service family and Mexican restaurants in 34 states.

In a complicated reorganization, Foodmaker Inc. in San Diego and two investment partners will acquire the former REG, which operates the El Torito Mexican restaurant chain and the Carrow’s and Coco’s chains.

REG acquired the Chi-Chi’s restaurants, most of which are in the East.

The reorganization calls for a cash infusion plan by Foodmaker and two investors, Apollo Advisers L.P. in New York and Green Equity Investors L.P. of Los Angeles, which will put a total of $95 million in cash into the restaurant company. The plan also calls for the company to enter into a $150-million credit agreement with Credit Lyonnais. Both actions are expected to be completed later this month.