PGHC Holdings, Inc., parent company of New England brands Papa Gino’s Pizzeria and D’Angelo Grilled Sandwiches, announced Monday that it has agreed in principle to sell the company to a Wynnchurch Capital portfolio company. In order to complete the proposed sale, the company filed for chapter 11 bankruptcy protection and shut down about 95 underperforming restaurants. The latter action took place November 4 “following a careful review and analysis.”
According to Masslive, “customers and employees were outraged over the weekend when PGHC Holdings closed the locations overnight without warning.” The company closed 47 Papa Gino's locations and 45 D'Angelo restaurants on Sunday, and plans to terminate the leases during the bankruptcy process. It laid off 1,100 employees.
PGHC said the proposed transaction would significantly strengthen the brands’ financial resources, and allow the company to remodel and modernize its 141 corporate stores in Massachusetts, New Hampshire, Rhode Island, as well as open additional units throughout New England, and enhance its online ordering capabilities at all restaurants.
“We are pleased to have reached an agreement that will ensure a long and prosperous future for these iconic New England restaurants," said Corey Wendland, chief financial officer, in a statement. "For some time, we have been pursuing a plan to strengthen our financial footing and secure capital for investment in our restaurants, while also addressing our significant debt load. We are confident that the agreement with Wynnchurch achieves all of those goals."
According to a bankruptcy filing, PGHC declared between $0 and $50,000 in assets and liabilities between $50 and $100 million. The company reported $62 million in secured debt and more than $100 million overall.
Wynnchurch is a middle-market private equity investment firm with $2.2 billion of committed capital under management. PGHC said the chapter 11 proceeding would ensure that the company maintains normal business operations at all of its restaurants with improved liquidity as it pursues the sale.
During the process, PGHC will also solicit competing offers to maximize the ultimate value of the sale, it said, which makes Wynnchurch a “stalking horse” bidder. The sale will require court approval. PGHC hired North Point Advisors as an investment banker, Hilco Real Estate to consult on properties, and CR3 Partners to help with financials.
The company noted it is generating positive cash flow from operations and has requested court approval for debtor-in-possession financing from Wynnchurch to provide additional liquidity during the sale process. PGHC will continue to pay its suppliers on normal terms and schedules for goods and services received during the chapter 11 process, it said. The company will continue to honor customer rewards and grift cards programs as well.
“We recognize we have a responsibility to not only provide for the future of these businesses, for our valued team members and guests, but to also ensure our current debt structure is sufficiently addressed," Wendland added. "We believe this process will allow us to do just that and build an even better company for all of our team members by creating an atmosphere that team members will be proud to serve in. PGHC will continue its long tradition of hosting birthday parties, team celebrations and other neighborhood events as well as serving delicious favorites like Papa Gino's famous 3-Cheese Pizza or a D'Angelo Steak & Cheese."
After the closures, 100 Papa Gino’s restaurants and 78 D’Angelo Grilled Sandwiches remain and continue to operate as normal. Where possible, the company said, it would look to move certain team members from closed restaurants to open ones.
Wendland said in a filing that a shift from dine-in to delivery and carryout stressed the brands and resulted in the need to remodel some stores and close others. So did rising minimum wage and higher health insurance costs. Larger, national brands pushed prices down, too.
The company said it contacted 100 potential buyers and pulled three potential deals. All were less than PGHC's secured debt, which Wynnchurch bought as it reached a deal to acquire the chains.
"These were hard decisions but decisions we believe were absolutely necessary to allow Papa Gino's and D'Angelo Grilled Sandwiches to continue serving New England now and for years to come," Wendland said. "We look forward to serving our guests the pizza and grilled sandwiches they have come to love over many decades. If your nearest Papa Gino's or D'Angelo has closed, be assured that your favorite pizza or Steak Number 9 sandwich awaits you at a re-energized restaurant not too far away."
Papa Gino’s Pizzeria was founded in 1961 and expanded from a single East Boston location to restaurants in Massachusetts, Rhode Island, New Hampshire, and Connecticut. It is the official pizza of the New England Patriots of the NFL, and the New England Revolution of Major League Soccer.
D’Angelo Grilled Sandwiches can trace its roots back to 1967 in Dedham, Massachusetts. Originally called Ma Riva’s Sub Shop, the brand changed its name in the 1970s and expanded its menu.