Punch Bowl Social, the “eatertainment” concept that had filed for bankruptcy in December, is set for a sale process after the company and its lenders resolved their differences.
The Denver-based chain, which is currently operating two of its 13 locations, reports considerable interest from potential buyers and is expected to name a “stalking horse” bidder this week. A stalking horse bidder sets the base price for an upcoming auction in a bankruptcy process and generally has the inside track to acquire the company.
“Peace has broken out,” Ted Gavin, Punch Bowl’s chief restructuring officer, said in an interview. “Interest has been robust.” He noted that a sale could close as early as mid-March following an auction for the chain.
Punch Bowl 18 months ago was widely considered one of the hottest concepts in the U.S., having earned a major investment from Cracker Barrel in 2019. But a failed effort at a smaller prototype led to a dispute from its lender, CrowdOut Capital, which intensified once the pandemic began and Cracker Barrel opted to write off its investment in the chain.
Punch Bowl filed for Chapter 11 debt protection in December, largely to prevent CrowdOut from taking over the company. The chain’s owners filed for bankruptcy without the knowledge of the lender—which had taken over operations of the chain earlier in the year, placing former Souplantation and Sweet Tomatoes CEO John Haywood into the chief executive’s seat.
The company and CrowdOut have since come to an agreement, with the lender providing funds to get the chain through the bankruptcy process. Gavin, managing director of bankruptcy consulting firm Gavin/Solmonese, was appointed to oversee the restructuring process.
Punch Bowl operated 18 locations at the end of 2019. That number is down to 13 following some permanent closures, but only two are currently operating. Gavin said the plan is to “aggressively reopen stores” as state COVID regulations allow.
“The bankruptcy process will protect the entities while they reopen,” Gavin said. “We will not make a store open earlier.”
Punch Bowl was not able to find a buyer last year, but Gavin suggested that interest in the company remains significant.
Several investment firms have been eyeing potential acquisitions of companies either out of bankruptcy or in bargain sales. Many such investors could easily target a company such as Punch Bowl, which had been on the edge of industry trends in the pre-COVID era—especially if those investors are betting on a quick return to dine-in business once restrictions are further eased and the vaccine makes its way through the population.
One such investor, Sortis Holdings, expressed interest in an acquisition last year, according to bankruptcy filings. But that deal fell through. Sortis is an investment firm that last year bought Sustainable Restaurant Group, the owner of Bamboo Sushi.
“There is a lot of value here for someone with patience,” Gavin said. “There’s a lot of upside here.”
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