(Updates with judge’s comment in third paragraph.)
Oct. 6 (Bloomberg) -- Friendly Ice Cream Corp., the 76- year-old restaurant chain known for its ice cream and hamburgers, won bankruptcy court approval of a $50.6 million loan to help fund operations while the company pursues a sale.
U.S. Bankruptcy Judge Kevin Gross, at a hearing today in Wilmington, Delaware, gave Friendly permission to borrow the money on an interim basis from an affiliate of the company’s owner, private-equity firm Sun Capital Partners Inc.
“It’s a very clean, fair and reasonable financing facility,” Gross said. Friendly will seek approval to borrow an additional $20.7 million at a hearing set for Oct. 24.
Friendly, which opened in 1935 with one shop in Springfield, Massachusetts, sought bankruptcy protection yesterday citing the struggling economy and rising commodity costs. The company plans to sell itself at an auction, with a Sun Capital affiliate as the lead bidder, court filings show.
Friendly has requested court permission to hold a Dec. 1 auction, followed by a Dec. 5 hearing to approve the sale. Under the proposed bid procedures, which also will be considered at the Oct. 24 hearing, all bids must be submitted by Nov. 24. Potential buyers would have to offer at least $122.6 million in cash to qualify for the auction.
The Wilbraham, Massachusetts-based company, commonly known as “Friendly’s,” closed 63 sites as part of the bankruptcy filing. Another 424 locations will stay open, Friendly said.
Debt is about $297 million and assets are valued at more than $100 million, according to court documents.
The case is In re Friendly Ice Cream Corp., 11-13167, U.S. Bankruptcy Court, District of Delaware (Wilmington).
--With assistance from Dawn McCarty in Wilmington, Delaware, and Tiffany Kary in New York. Editors: Stephen Farr, John Pickering
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