On November 6, Taco Bueno Restaurants filed for Chapter 11 relief with a prepackaged plan. Taco Bueno, founded in Abilene Texas in 1967 has closed 19 locations in 4 states. One hundred sixty-nine restaurants remain open in Texas, Oklahoma, Kansas, Louisiana, Missouri, and Arkansas.
Dallas based Sun Holdings won a silent auction for Taco Bueno’s debt. Once the bankruptcy process is complete, Sun will gain control of Taco Bueno adding to the more than 800 restaurants they currently own.
Heavy Rains and Overwhelming Debt
Taco Bueno decided to sell the company when faced with over $130 million in debt and leased locations that were in danger of being evicted. In profitable Dallas area, restaurants eviction process had already begun. The heavy rain the Dallas area received also caused a 20% drop in sales for the struggling company in the last two months.
Sun Holdings will become the owner of Taco Bueno through a debt-for-equity swap. The restaurants will continue operations as usual through the chapter 11 proceedings.
Debt for Equity Swap
In a debt-for-equity swap, the companies creditors agree to cancel some or all of the debt in exchange for equity in the company. The creditors often prefer to take control of the business if the debt and remaining assets are too large, there is no advantage to drive the company into bankruptcy.
Guillermo Perales, Sun Holdings CEO and founder said “We see considerable opportunities to invest in the Taco Bueno footprint to enhance the customer experience and drive long-term growth for the brand’.
Prearranged Chapter 11
In a traditional Chapter 11, the reorganization plan is formed during the course of the bankruptcy. In a prepackaged case, the company goes into chapter 11 already negotiating agreements with the lenders, financing and debt repayments. A prepackaged Chapter 11 generally speeds up the bankruptcy process and takes within 3 to 9 months from filing to exiting bankruptcy.
If your home finances or business is struggling, contact a Dallas bankruptcy attorney to see what options you may have.