The United States Bankruptcy Court for the Western District of Texas, San Antonio Division, has approved Schlotzsky’s motion to set a procedure for the sale of substantially all of the assets of the company to a qualified investor. When the sale is completed, Schlotzsky’s will have new ownership, and the new owner will be able to operate the Schlotzsky’s brand, company restaurants, and franchise system without the burden of the millions of dollars in debts that forced the Company to seek bankruptcy protection in June 2004.

“We hope to soon have a strong financial owner or owners that will enable us to grow again, provide jobs for our employees, and better serve our franchisees — essentially, to have a new lease on life,” said Sam Coats, president and CEO of Schlotzsky’s. “We are delighted that the court has approved this sale procedure.”

The process will be conducted as follows:

  • December 6: Qualified bids — equal to or greater than the reserve
    price of $25 million — are due by 12 noon CST.

  • December 7: An auction for Schlotzsky’s assets will take place at the
    Dallas offices of the Company’s law firm, Haynes and Boone. Bids will
    begin with the best-qualified bid and continue in minimum increments of
    $100,000. Schlotzsky’s and certain secured creditors determine the “highest
    and best” bid.

  • December 8: The “highest and best” bid is presented to Judge Clark at
    a “Sale Approval Hearing” at 10:30 am CST.

  • December 31: Deadline for the closing of the sale transaction,
    although it could take place within days of the December 8 hearing.

Schlotzsky’s motion reserves the right to name a lead investor prior to the December 6 deadline, with that lead investor then becoming eligible for a break-up fee of $250,000.

Schlotzsky’s says it continues to be approached by qualified parties interested in participating in the auction process and has been contacted by more than 10 new potential investors since announcing on November 16 its plan to sell its assets via an auction. Schlotzsky’s expects the auction process to attract as many as a dozen legitimate participants.

News, Sandwiches, Schlotzsky's