Two bidders have emerged in the bankruptcy auction of Real Mex Restaurants and a decision by the court is expected this week.
One is a group of noteholders including investment funds managed by Tennenbaum Capital Partners LLC, along with J.P. Morgan Investment Management Inc., and private equity firm Z Capital LLC.
The second bidder is Harshad Dharod, president and owner of Friendly Franchisees Corp., a franchise operation that, through affiliates, owns and operates 63 Carl’s Jr., 12 Papa John’s and 18 Denny’s restaurants.
The hearing date for approval of a sale is scheduled for Feb. 10.
The Cypress, Calif.-based parent of the El Torito, Acapulco and Chevys Fresh Mex brands filed for bankruptcy in October, and company’s assets were put up for auction Feb. 2.
Proposed terms of the bids were not disclosed in court filings, but both bidders offered a brief statement of intentions.
The noteholders group, which proposed acquiring Real Mex under an entity called RM Opco, would hold about 85 percent of the company’s equity interest under their plan. The remaining 15 percent would be held by holders of senior secured notes due in 2013.
The group said it would continue the company’s current brand re-imaging efforts, including revamping menus and marketing initiatives.
If approved by the court, it would mark the second hospitality investment in recent weeks by Z Capital, which in December joined The Carlyle Group in acquiring Mrs. Fields Famous Brands, parent of the Mrs. Fields cookies and the TCBY frozen yogurt chains.
Dharod’s company in court filings said it would operate Real Mex restaurants with a significant number of current management and employees, and that the acquisition would be made for strategic purposes to hold, operate and grow the company.
Dharod has “no intention of briefly operating the company then reselling it,” the filing said.
Real Mex officials declined to comment on the ongoing legal process.
Real Mex is owned by private-equity firm Sun Capital Partners, based in Boca Raton, Fla., which also owns Friendly’s Ice Cream Corp.
Friendly’s also filed for bankruptcy in October and was put up for auction in December — only to be repurchased by Sun Capital in a credit bid deal that closed last month.
Real Mex operates 144 restaurants under the El Torito, Acapulco and Chevys brands, as well as one-off Las Brisas Restaurant in Laguna Beach, Calif.; and small regional concepts Who-Song & Larry’s, Casa Gallardo and El Paso Cantina.
The Chevys chain includes 24 franchised locations. The company’s assets also include Real Mex Foods, a food production subsidiary.
Roughly 30 restaurants have been closed over the past six months.