Struggling Kona Grill Inc. said it may have to file for bankruptcy even if talks with lenders and consideration of strategic alternatives are successful, according to federal filings Tuesday.
The Scottsdale, Ariz.-based casual-dining company also said in delayed federal filings, “We may be required to file for protection in bankruptcy, even if we are successful in effecting a sale of our business or improving our capital structure. Any bankruptcy proceeding may result in the holders of our common stock receiving no proceeds.”
The struggling company, which has closed a dozen units in the past two years and discontinued expansion, said Jonathan Tibus was named CEO effective Wednesday.
Tibus is a managing director with Alvarez & Marsal North America LLC and served as CEO of Real Mex Restaurants Inc., which owns the Chevy’s, El Torito, Sinigual and Las Brisas concepts. He also worked with Ignite Restaurant Group Inc., owner of Joe’s Crab Shack and Brickhouse Tavern, and Last Call Operating Co., owner of Fox & Hound and Champps. Earlier, Tibus has served as chief restructuring officer of Quiznos and chief operating officer of Max & Erma’s.
The company also appointed Christopher Wells as chief restructuring officer, effective Wednesday. Wells recently served as chief financial officer of Real Mex Restaurants Inc., the Cypress, Calif.-based company that filed for bankruptcy in August 2018.
“Unless the company receives an equity investment, or unless some third party acquires the company’s debt from the secured lenders, the company may be required to file for protection under Chapter 11 of the U.S. Bankruptcy Code,” the company said in its 10-K filing. “It is possible that even a successful implementation of one of the strategic alternatives that we are pursuing will require us to make a Chapter 11 filing.”
For fiscal 2018 ended Dec. 31, Kona said its loss widened to $32 million, or $2.62 a share, from a loss of $23.4 million, or $2.32 a share, in fiscal 2017. Revenues for the year declined 12.4%, to $156.9 million in 2018 from $179.1 million in 2017.
Kona Grill has closed more units recently, including a shuttering April 12 in Stamford, Conn., and another in Short Pump, Va., according to local media reports.
The company has also seen a string of shakeups in its executive ranks, recently naming Christi Hing, the brand’s chief financial officer, as interim CEO to succeed Marcus Jundt, who resigned in March.
The company has seen six executives at the top position since August, when the grill-sushi brand promoted Jim Kuhn, chief operating officer, to succeed Berke Bakay in the role. Board members Jundt and Steve Schussler were named co-CEOs in November. Schussler stepped down in January, leaving Jundt as sole CEO until he resigned March 31.
Kona said it grew its number of restaurants “significantly from 2013 to 2016 and doubled the size of the company from 23 restaurants in 2012 to 46 restaurants by 2017.” However, with the recent closures, it now has 34 restaurants in 20 states and Puerto Rico. It also has two international franchised units.
The company said its options include a sale of the company, sale of assets through Chapter 11, refinancing and further closures.
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