CALGARY — Calgary-based multi-brand restaurant owner Franworks Group of Cos. has offered US$22.75 million to acquire the bankrupt Boston-based Elephant & Castle Group Inc. (MECG) and its 14 related subsidiaries.
The U.S. Bankruptcy Court for the District of Massachusetts in Boston is scheduled to consider the proposed bidding procedures Nov. 29 for the British-style pub operator, which names Original Joe’s Acquisition Corp. as its stalking-horse bidder.
MECG filed for Chapter 11 protection in the U.S, on June 28 and subsequently under the Companies’s Creditors Arrangement Act in Canada. Under the proposed Original Joe’s bid, any competitive bidder would have to bid at least US$23.46 million and provide a 10-per-cent deposit. Original Joe’s would be entitled to a two-per-cent, or US$455,000, breakup fee and up to US$250,000 for expense reimbursement if it lost at an auction.
MECG has been operating during bankruptcy with use of cash collateral. As of June 28, it had, on a consolidated basis, about US$365,000 in cash, US$501,000 in inventory, $US12.8 million in fixed assets and US$300,000 in accounts receivable. MECG owed about US$18.8 million to GE Canada Equipment Financing GP; debtor-affiliate Repechage Investments Ltd. owes Fifth Street Finance Corp. US$3.5 million; Sysco San Diego Inc., Royal Bank of Canada and Toronto Dominion Bank have also filed liens on the debtor’s assets, but MECG disputes them. MECG had an average sales volume in the U.S. of US$2.9 million and $2.3 million in Canada.
MECG owns 18 pubs and franchises, with two locations in the U.S. and Canada. The first Elephant & Castle pub, modelled on a London, England pub, was opened in 1977 in Vancouver.