Next in line for bankruptcy protection: Fatburger

By Steve Green

Thursday, April 9, 2009 | 5:35 p.m.

Fatburger Restaurants of Nevada Inc. and its sister company in California have filed for Chapter 11 bankruptcy protection, saying the recession has slowed sales and reduced the availability of bank financing.

The filings Tuesday in U.S. Bankruptcy Court in San Fernando Valley, Calif., say Fatburger has 13 restaurants in Nevada with 205 employees, as well as two parcels of developed real estate. The Nevada restaurants generated sales of $12 million in 2008, the company said.

The company intends to keep the restaurants open, Fatburger and Fog Cutter Capital Group Inc. Chairman Andrew Wiederhorn said.

"It's business as usual," while the company restructures its finances, he said.

In Nevada, the bankruptcy involves company-owned restaurants in Las Vegas, but not franchise Fatburger locations that are located outside of Las Vegas, he said. The California filing involves 19 restaurants with 285 employees that generated sales of $14 million last year.

In separate bankruptcy filings, the California and Nevada businesses listed debts and assets of $1 million to $10 million apiece.

Fog Cutter, of Portland, Ore., parent company of the businesses, said the filing came after several of its Fatburger subsidiaries received a notice of default and demand for payment on loans totaling $3.85 million from General Electric Capital Business Asset Funding Corp. The default notice required payment by Tuesday, or the due dates would be accelerated to that date. Fog Cutter said it failed to resolve the default and would seek to restructure the GE loans as part of the Chapter 11 cases while continuing to operate the restaurant businesses.

Fog Cutter has not yet filed a fourth-quarter report. For the third quarter of 2008, it reported a loss of $4.4 million or 55 cents per share for the three months ended Sept. 30, compared to net income of $65,000 or 1 cent per share for the third quarter of 2007.

The bankruptcy filing said Fatburger's new business plan focuses on getting out of leases with unfavorable rental rates so it's left with only profitable restaurants; and that it plans to restructure its debt.

Of the unsecured creditors in Nevada, Station Casinos Inc. properties are among the largest listed with Fatburger listing debts for casino food court leases. Those include debt of about $80,000 to Red Rock Resort, $50,000 to Santa Fe Station, $41,000 to Green Valley Ranch Resort, $30,000 to Texas Station, $27,000 to Sunset Station and $22,000 to the Fiesta Henderson. Other landlords around town were listed as creditors as well.

The largest individual creditors in Nevada are U.S. Foodservice, $303,000; and the state Department of Taxation, $160,000.