Sbarro LLC filed a petition with the U.S Bankruptcy Court for the Southern District of New York seeking reorganization under Chapter 11 of the U.S. Bankruptcy Code.

The filing was made to implement a prepackaged reorganization plan supported by a near-unanimous majority of the company’s lenders representing 98 percent of the Company’s debt. The consensual filing is designed to allow for a quick exit from bankruptcy as the Company executes a broader plan developed by the new management team that included the closure of underperforming stores.

The group of lenders supporting the prepackaged plan of reorganization are providing $20 million of debtor-in-possession financing to the company that will remain on the balance sheet post-bankruptcy, and the approximately $140 million of outstanding secured debt will be eliminated, with priority lenders receiving substantially all of the equity in the reorganized business.

“The agreement among the company’s lenders is an indication of the support and confidence they have in the growth strategies developed by the new management team over the past nine months. The board and senior management team are committed to ensuring Sbarro’s future growth and success and today’s filing is a necessary step to achieve those goals,” says David Karam, Sbarro chairman and chief executive officer.

The combination of the store closure strategy and the balance sheet restructuring contemplated by the prepackaged plan will improve the Company’s profitability and reduce its outstanding debt by more than 80 percent, resulting in a much stronger organization.  As part of the agreed plan, the company will run a marketing process for any topping bids to ensure creditor recoveries are maximized, but in the absence of an alternative transaction will seek to promptly confirm the standalone reorganization.

Sbarro has more than 800 stores worldwide in more than 40 countries including 81 new stores opened in 2013.  The filing does not affect the 600 franchise locations worldwide.