BY BETH EWEN
Gigi’s Cupcakes filed for Chapter 11 bankruptcy protection in January.
The last time Gigi’s Cupcakes changed hands, in 2016, the franchise founded by Gina Butler sold for $6 million to Key Corp. and its affiliate Fund Corp. Now MTY Franchising USA is offering $2 million cash, and Gigi’s is seeking additional qualified bidders before a planned March 25 auction date.
MTY will also assume certain liabilities if the sale closes, according to a February 22 filing as part of Gigi’s Chapter 11 bankruptcy case. Gigi’s assets are $4.4 million and liabilities are $11.98 million, according to the filing.
MTY Food Group is the Montreal-based company whose biggest acquisition to date was in 2016, when it bought Kahala Brands for $310 million. It owns casual dining, fast casual and quick-service restaurants operating under more than 70 brand names.
The filing says Gigi’s needs to be sold because of its debtors’ “lack of short- and long-term liquidity,” and because the termination date for the use of Equity Bank’s cash collateral is March 31.
Gigi’s and a sister company, Mr. Gatti’s Pizza, borrowed a total of $30 million from Equity Bank in two loans last June. After both brands filed for Chapter 11 bankruptcy protection in early January, the court approved the temporary use of the collateral held by Equity to keep operations going.
In an e-mail February 25, Dawn Ragan, chief restructuring officer for Mr. Gatti’s and Gigi’s Cupcakes, took issue with my articles about Gatti’s/Gigi’s in January and March, saying there are “egregious mischaracterizations of the facts.”
“In order for you and your publication to not continue to misrepresent or misstate the facts, including by relying on one-sided information you ostensibly receive from plaintiff’s counsel,” she continued, “I would suggest you reach out to me going forward prior to further publications, so that I have the opportunity to correct the record before printing inflammatory statements regarding Gatti’s or Gigi’s or referenced litigation.”
She wrote she would try to prepare a statement regarding the debtor’s position, but hadn’t sent it as of this posting. Ragan didn’t immediately return a phone call for comment on this article.
The Feb. 22 filing says, “Given the debtors’ current liquidity constraints, the debtors believe that a prompt sale process is the best way to maximize the value of the assets for the benefit of the debtors’ estates, creditors and other stakeholders.
“Because the debtors are required under the final cash collateral order to sell Gigi’s assets by March 31, 2019, any delay in the sale process will jeopardize debtors’ ability to maximize value for the benefit of all creditors.”