Einstein/Noah Bagel: Still Chapter 11, with losses mounting
By Bob Sperber,
Managing Editor, Bakery Online
Einstein/Noah Bagel Corp., has been having a difficult time surviving. Results of its third financial quarter, released in recent weeks, showed mounting losses, and a planned reorganization hangs in the balance despite an April 28 filing for Chapter 11 bankruptcy protection. (See Bagels & bankruptcy, it's Chapter 11 for Einstein/Noah).
Before the bankruptcy filing, in the first days of April, the company told Bakery Online, "We're not closing any stores, the bills are getting paid and we are in no imminent danger of closing stores tomorrow." At the time, The company had already closed 74 Einstein Bros. stores and Noah's New York Bagels stores, located primarily in Los Angeles, Boston, Philadelphia and New York, leaving 465. (See Einstein Bagel's fate hinges on debt restructuring).
A handful of stores has since closed.
About the re-org: The fate of the 459 Einstein Bros. and Noah's New York Bagels stores in 29 U.S. states is uncertain. The Chapter 11 bankruptcy protection filing followed attempts by the company to reorganize $125 million in bonds could not work out a plan to reorganize the company's debt. A hearing is scheduled with regulators on Dec. 19.
Management representatives filed the reorganization plan in October , proposing a reorganization of approximately $125 million in debt, but by some accounts, the re-org could drag the company's common stock down to the penny-stock realm. (Einstein/Noah trades over the OTC Bulletin Board: ENBXQ … to track shares, click to My Bakery Online to view stocks and create your own portfolio.)
Unsecured creditors filed an objection to the plan. The company attempted to satisfy them, working with an Official Committee of Unsecured Creditors appointed by the United States Trustee on an agreement, which was reached in mid-September. The committee, representing more than $65 million of the Company's then-7.25% Convertible Subordinated Debentures, was said to support the plan but reserved the right to challenge the distribution of funds.
Financials: And the company has continued losing money. For the quarter ended Oct. 1, Einstein/Noah showed a $3.8 million loss, compared to a $0.8 million loss for the same period a year ago. Store revenues were $82.7 million, vs. $88.4 million the year earlier. In its filing with the Securities and Exchange Commission, the company reported a loss of $22.6 million for the nine months that ended Oct. 1 on store revenue of $285 million (vs. a loss of $ 11.2 million on revenue of $288 million for the same period a year ago.)
On Oct. 17, Robert C. Ellis was appointed interim chief financial officer after Paula E. Manley left the company to assume that role for Follett Higher Education Group in Oak Brook, IL.
New World no angel: In late August, Einstein/Noah rejected a takeover offer-letter sent by New World Coffee-Manhattan Bagel Inc. to the Creditors' Committee. The New World letter, which also referenced a June 21 proposal that Einstein/Noah denied receiving, and called "incomplete and vague" and lacking "a basis for any meaningful discussions."
Einstein Bros. and Noah's stores featuring fresh-baked bagels, a variety of cream cheese spreads, specialty coffee drinks, soups, sandwiches and salads.