Mrs. Fields seeks debt revamp: Bankruptcy looms if investors don't agree to restructuring plan

Jun 21, 2008 (The Salt Lake Tribune - McClatchy-Tribune Information Services via COMTEX) -- MRSFF | Quote | Chart | News | PowerRating -- Mrs. Fields Famous Brands, the heir to the chocolate chip cookie empire that made Utahn Debbi Fields a retail celebrity, is trying to restructure its debt to avoid a Chapter 11 bankruptcy.

The Salt Lake City-based cookie conglomerate is hoping that investors who hold about $195 million of its notes will be willing to swap that debt for a combination of $90 million in cash, $50 million in new notes and company stock.

In announcing the proposed debt restructuring, Mrs. Fields Chief Executive Stephen Russo vowed the company will take every measure needed to ensure the owners of its franchises will be unaffected.

Mrs. Fields has 1,600 franchised locations operating in more than 20 countries under the Mrs. Fields Cookies and TCBY names. TCBY is a chain of frozen yogurt stores that was acquired by the Utah company in 2000.

"Our franchisees are the foundation of our company, and we will take every measure to ensure that it is business as usual for them," Russo said. "This restructuring will allow us to become a stronger company and to further improve our relationships with our franchisees and customers."

Debbi Fields no longer has a management role with the company she founded. Still, she remains the face of the company and her story of drumming up sales by offering free cookie samples outside her first mall location in Palo Alto, Calif., in the late 1970s holds a place in retail lore.

Mrs. Fields expects to begin its debt exchange offer by June 30. It indicated, however, that if the holders of 98 percent of the notes aren't willing to go along with the restructuring, it intends to file a "prepackaged" Chapter 11 bankruptcy petition by mid-August.

A prepackaged Chapter 11 typically involves a company soliciting the needed support from a majority of its creditors for a debt-reorganization plan before filing a petition with the U.S. Bankruptcy Court. If successful, the company's stay in bankruptcy court can be shortened, sometimes to eight weeks or less.

Russo went on to explain that reducing the company's debt from $195 million to $50 million will improve Mrs. Fields' near-term financial picture and allow it to expand and upgrade its store base.

Financial statements on file with the Securities and Exchange Commission indicated that Mrs. Fields reported total revenue of $98 million and a loss of $1.7 million for its fiscal year ended Dec. 29, 2007. A year earlier the company recorded revenue of $96.5 million and a loss of $21.9 million.

Those financial statements also indicate that the company is facing a $10.2 million interest payment on its notes that is due in September. However, without a restructuring of its debt, it will be unable to meet that obligation.

steve@sltrib.com

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