AmeriKing, Inc., one of the largest independent BURGER KING® franchisees headquartered in Westchester, Illinois, today announced that it has commenced voluntary bankruptcy proceedings under Chapter 11 of the United States Bankruptcy Code. The petition was filed in the United States Bankruptcy Court in Wilmington, Delaware.
This filing is a necessary step in AmeriKing's planned reorganization and its ongoing negotiations with its bank group and others to restructure its balance sheet and extend the maturity of its credit facility. A detailed restructuring plan is being finalized that would allow a significant portion of the debt to be exchanged for equity ownership in the company, thereby significantly deleveraging the balance sheet and substantially reducing annual interest payments.
Additionally, AmeriKing says it is working with potential investors to secure an investment to fund capital improvements. All of these dollars would be invested into the restaurants to fund key capital projects such as new drive- thru systems, new signage and restaurant remodels.
As part of its restructuring plan, AmeriKing has closed 23 underperforming restaurants, leaving the company with 329 restaurants located primarily in twelve Midwestern and Mid-Atlantic states. The company has placed the majority of the impacted employees into positions in existing restaurants.
Joe Langteau, president and chief executive officer, said, "This is a critical moment in our company's history. This restructuring, when successfully completed, will enable us to significantly reduce our long-term debt and position us to accelerate our turnaround. We are committed to the BURGER KING® brand and are excited about the programs underway to improve systemwide performance. We are looking forward to working closely with our bank group and Burger King Corporation to finalize the details of this restructuring agreement."
Ben Hirst, Executive Vice President of Burger King Corporation, said, "We intend to work with AmeriKing and its lenders and suppliers to achieve a fair and equitable restructuring in Chapter 11. We are confident that AmeriKing will be able to accomplish the financial restructuring and infusion of capital that are necessary to stabilize its business, strengthen its balance sheet, and improve its operations. As one of our largest franchisees, AmeriKing will continue to be an important and valued business partner of Burger King Corporation."
This announcement comes at a trying time for Burger King Corporation. Parent company Diageo PLC is undergoing renegotiations with an investment group led by Texas Pacific to sell the burger chain. Recent poor performance systemwide has caused the group to seek a lower purchase price from the original $2.26 million.
In addition, Burger King is locked in a head-to-head pricing battle with rival McDonald’s over burger market share. Franchisees approved a major discount on the signature sandwich the Whopper to 99 cents just last week.