Earlier this month, George L. Miller, the chapter 7 trustee (the “Trustee”) in the GRA Liquidation bankruptcy proceeding began filing preference complaints against various defendants. For those not familiar with the GRA Liquidation bankruptcy, Debtor Pecus ARG Holding, Inc. and certain affiliated companies (the “Debtors”) filed chapter 11 petitions for bankruptcy with the Delaware Bankruptcy Court on January 15, 2009. At the time the company filed for bankruptcy, Debtors owned and operated the Black Angus Restaurants. This post will look briefly at the Debtors’ business, why Debtors filed for bankruptcy as well as the first steps of the Trustee now that he has commenced the preference actions.
Debtors began their operations in 1964 as the Black Angus Steakhouse in Seattle, Washington. By the time Debtors filed for bankruptcy protection in Delaware, the company had grown to 69 restaurants located in 7 states throughout the western United States and Hawaii. Going in to bankruptcy, Debtors had $53 million in secured debt under a revolving credit agreement and $13 million reserved for letters of credit. For more information regarding Debtors background and operations, see Debtors’ Declaration in Support of First Day Motions (the “Declaration”), a copy of which is available here for review.
Events Leading to Bankruptcy
This is not the Debtors first time in bankruptcy. In 2004, Debtors’ predecessor, American Restaurant Group, filed petitions for bankruptcy in the United States Bankruptcy Court for the Central District of California. Following their first bankruptcy, Debtors borrowed over $25 million to upgrade their restaurants and Debtors’ operating systems. Despite Debtors’ efforts, profits and revenues continued to drop. Debtors attributed their poor performance, in part, to the fact that their restaurants were located in areas hardest hit by the recession. Declaration at *7.
The Delaware Bankruptcy Proceeding
Debtors filed for bankruptcy intending to reject unprofitable restaurant leases and continue with their efforts to sell their businesses as a going concern. Declaration at *9. On March 13, 2009, the Delaware Bankruptcy Court entered an order approving the sale of Debtors’ assets to Taurian BA, LLC. Pursuant to the sale order, Debtors liquidated substantially all of their remaining assets and ceased business operations. On April 6, 2010, the Bankruptcy Court entered an order converting the Debtors’ bankruptcy proceeding to a chapter 7 liquidation. Soon after, on May 3, 2010, George L. Miller was appointed the chapter 7 trustee. As the Trustee, Miller is pursuing various causes of action against creditors and third parties, including the preference actions filed earlier this month.
This bankruptcy proceeding is before the Honorable Kevin J. Carey. Judge Carey is the Chief Judge of the Delaware Bankruptcy Court. The Trustee is represented by the law firm of Ciardi Ciardi & Astin.