Ignite Restaurant Group Inc. filed for federal bankruptcy protection on Tuesday and has a deal in place to sell the company to a private-equity group.
Kelly Investment Group, which bought Champps and Fox & Hound out of bankruptcy last year, has a “stalking horse” bid of $50 million for Ignite, owner of Joe’s Crab Shack and Brick House Tavern + Tap.
As a stalking horse bidder, Kelly has the inside track on acquiring the company in a bankruptcy auction, though another bidder could potentially buy Ignite by paying more for the company.
The bankruptcy followed a steep decline at Ignite that led to its delisting earlier this year and the company’s announcement that it planned to seek a buyer. Same-store sales at Joe’s Crab Shack have been deteriorating and plunged 14.3 percent in the first quarter.
According to court filings, seven potential buyers were interested in bidding for the company following the sale process, and two companies were interested in providing financing.
Yet, “amid continued declining same-store sales trends, the degradation of restaurant-level margins, and broader concerns that surfaced in media and analysts reports regarding the casual-dining and restaurant sector as a whole, these trends created an extremely challenging backdrop for investors,” according to a filing.
Potential buyers withdrew their proposals and “the remaining offers were not viewed as viable.”
Last week, Debtwire reported that Landry’s — Joe’s Crab Shack’s former owner — and American Blue Ribbon Holdings were interested in acquiring Ignite.
After the initial sale process fell through, investment bankers working for Ignite approached bidders interested in buying the company through bankruptcy — which would enable the buyers to purchase Ignite without assuming the debt on the company.
A subsidiary of Kelly Investment Group, KRG Acquisitions Co, LLC, outbid two other bidders to become the stalking horse bidder.
Ignite lists $197 million in liabilities and $153 million in assets. The company’s most recent earnings report listed $131.2 million of “current” debt obligations.
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