The parent company of Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches filed for bankruptcy protection on Monday and put itself up for sale after the two brands closed 95 restaurants over the weekend.
PGHC Holdings said that it has an agreement in principal to sell itself to a subsidiary of Wynnchurch Capital. The investment firm would be a “stalking horse bidder,” meaning another buyer could step in and outbid the company during an auction.
The two brands now operate 178 locations, most of which are company-operated. Papa Gino’s has 100 restaurants remaining, and D’Angelo has 78.
According to bankruptcy court documents, PGHC has $62 million in secured debt and more than $100 million in debt overall.
Wynnchurch bought some of the company’s debt from one of its lenders over the summer and has agreed to buy the two restaurant chains for a “credit bid” of $20 million, plus the assumption of certain liabilities. Wynnchurch is also providing up to $13.8 million in financing to help PGHC get through the sale process.
The Dedham, Mass.-based PGHC said that the sale would enable the company “to remodel and modernize their 141 company-owned restaurants throughout New England” and improve online ordering.
The agreement “will ensure a long and prosperous future for these iconic New England restaurants,” CFO Corey Wendland said in a statement.
“For some time we have been pursuing a plan to strengthen our financial footing and secure capital for investment in our restaurants while also addressing our significant debt load. We are confident that the agreement with Wynnchurch achieves all those goals.”
The company has hired North Point Advisors as an investment banker and CR3 Partners as a financial advisor. It also hired Hilco Real Estate as a real estate consultant, according to the bankruptcy filing.
PGHC said that the bankruptcy process will ensure the company “can maintain normal business operations” by providing the company with financing as it goes through the sale process.
The company said that it will continue to honor customer rewards and gift card programs. The company said that it closed the restaurants to focus on operating “a core of best-performing restaurants.”
“These were hard decisions but decisions we believe were absolutely necessary to allow Papa Gino’s and D’Angelo Grilled Sandwiches to continue serving New England now and for years to come,” Wendland said.
Both Papa Gino’s and D’Angelo have struggled to generate sales growth in recent years. Papa Gino’s system sales fell 4.3% last year, according to Technomic data. System sales declined 1.7% at D’Angelo.
UPDATE: This story has been updated to add details.