Sizzler Plans to Repay Creditors in Full

Sizzler International closed more restaurants than anticipated under Bankruptcy Court protection but will repay all of its creditors in full, the Los Angeles company revealed in its reorganization plan filed Monday.

Sizzler is poised to return to profitability and expects to emerge from Chapter 11 bankruptcy proceedings by June 1, a year after the original filing, said Christopher Thomas, chief financial officer of Sizzler International Inc. and chief operating officer of Sizzler USA, which operates and franchises Sizzler restaurants in the United States.

“We accomplished a lot of the things that we set out to accomplish and we’re really pleased with the way it has worked out,” Thomas said.

The filing led to the immediate closure of 130 Sizzler restaurants and the firing of about 4,600 employees, most of who worked part time. Sizzler’s profitable international subsidiary, which operates 42 Sizzlers and 94 KFC (formerly Kentucky Fried Chicken) restaurants, in Australia and Asia, was not affected by the bankruptcy.

Sizzler International’s reorganization plan calls for full payment of creditor claims, estimated at about $70 million. Reorganization plans filed in January and February for the domestic restaurant operations estimated that about $25 million will be paid to creditors of the U.S. restaurant business--also payment in full.

The plan anticipates no dilution of shareholders’ equity.Business is improving at the remaining U.S. restaurants, the company said.

“We will continue to make progress throughout the fourth quarter,” Thomas said. The U.S. restaurants “are poised to become profitable.” For the nine months ended Feb. 4, Sizzler posted a loss of $1.4 million, or 5 cents a share. Revenue was $240.5 million.

Sizzler’s bankruptcy filing was somewhat unusual because the company was fairly healthy financially when it entered Chapter 11, which allows a company to continue operating out of reach of creditors while it works out a plan to pay off debts. Sizzler chose Bankruptcy Court as a route to enable it to escape costly leases.

Since the filing, Sizzler has closed about a dozen more restaurants with 35 to 40 employees per restaurant, on top of the 130 expected closures, Thomas said. Sizzler, which started 40 years ago in a converted trailer in Culver City, now owns or franchises 410 Sizzler restaurants worldwide and franchises KFC restaurants in Australia and Asia. It employs about 9,000 people.

The chain is beginning to implement portions of a concept, called “Sizzler American Grill,” which it had emphasized at the time of the bankruptcy filing. The concept involves menu, decor and service changes but will not be as sweeping as envisioned by former Sizzler USA President Timothy Ryan, who resigned in December.

Sizzler shares rose 25 cents to close at $2.50 on the New York Stock Exchange.