Mrs. Fields takes steps toward bankruptcy filing

Mrs. Fields Famous Brands L.L.C. on Friday said it plans to file for Chapter 11 bankruptcy protection, according to an Aug. 15 filing with the U.S. Securities and Exchange Commission.

The company, which through its franchisees’ retail stores is one of the largest retailers of freshly baked, on-premises specialty cookies and brownies in the United States and the largest retailer of soft-serve frozen yogurt with live active cultures in the United States, has begun soliciting votes from creditors for a "prepackaged" bankruptcy reorganization plan.

According to the company’s S.E.C. filing, a "prepackaged" plan of reorganization is one in which a debtor seeks approval of a plan of reorganization from affected creditors before filing for bankruptcy. Because solicitation of acceptances takes place before the bankruptcy filing, the amount of time required for the bankruptcy case is often less than in more conventional bankruptcy cases. Other benefits of a "prepackaged" plan are greater certainty of results and reduced costs.

Mrs. Fields said the primary purpose of the plan of reorganization "is to effectuate the restructuring of the company’s capital structure in order to bring it into alignment with the company’s present and future operating prospects and to provide the company with greater liquidity.

"We are highly leveraged relative to our cash flow, our liquidity position has been steadily deteriorating and is currently severely restricted and we will not be in a position to make the interest payment due on the old notes on Sept. 15, 2008. The company believes that the restructuring will reduce uncertainty with respect to its future and better position it to develop and maintain new customers."

In its S.E.C. filing, Mrs. Fields listed total debt as of June 28 at $202.2 million and total cash at $97.8 million for a net debt of $104.4 million. After factoring in members’/shareholders’ deficit of $120.4 million, the company had a negative total book capitalization of $16 million.

Mrs. Fields also noted in the filing that after a careful review of operations it determined that reorganization would be preferred to selling its assets.

"The company believes that its businesses and assets have significant value that would not be realized in a liquidation, either in whole or in substantial part," Mrs. Fields said. "Consistent with the liquidation analysis described herein and other analyses prepared by the company and its advisors, the value of the company’s assets would be considerably greater if the company operates as a going concern instead of liquidating. Moreover, the company believes that any alternative to confirmation of the plan, such as an out-of-court restructuring, liquidation, or attempts by another party in interest to file a plan of reorganization, would result in significant delays, litigation, and additional costs, and ultimately would lower the recoveries for holders of allowed claims and interests."