Denver-based Quiznos said today that it has completed a previously announced financial restructuring that gives control of the company to a New York hedge fund.
Avenue Capital Group becomes the majority owner of Quiznos by virtue of Avenue’s $150 million equity infusion and the conversion of its debt to equity.
Quiznos previously was owned and controlled by Consumer Capital Partners, a Denver investment firm led by Quiznos founder Rick Schaden and his father, Richard, and CCMP Capital Advisors, a private-equity firm spun off from JPMorgan Chase.
“Improving our balance sheet and putting our capital structure issues behind us are major steps forward to strengthening the Quiznos brand and our customer experience,” Greg MacDonald, Quiznos chief executive officer, said in a statement
Avenue Capital’s conversion of debt to equity eliminates about $300 million, or slightly more than one-third, of Quiznos’ total debt of $875 million.
The once-high-flying sandwich chain had been under heavy financial pressure as sharpened competition, waning sales and debt woes led to a string of store closings and financial losses.
Sales fell 23 percent from 2008 to 2010, and the number of stores has plummeted from about 5,000 to possibly fewer than 3,000, according to restaurant consulting firm Technomic Inc.
Without agreement from its creditors on the Avenue Capital restructuring, Quiznos likely would have needed to file for Chapter 11 bankruptcy reorganization.
“It’s certainly good news for franchisees and creditors that the Quiznos restructuring has been finalized,” said John Gordon, principal at Pacific Management Consulting Group in San Diego, who has advised Quiznos franchisees in their disputes with the company.
“Additional Chapter 11 actions would have been expensive and would divert the company further,” Gordon said. “Quiznos must quickly but smartly rebuild its business model.”
Avenue Capital manages assets estimated at $11.6 billion. Last January, it was ranked by Bloomberg as the 13th-largest U.S. hedge fund.
Steve Raabe: 303-954-1948 or sraabe@denverpost.com
