Atalaya acquires Bennigan’s brand as parent folds

The middle market private equity investor had previously purchased securities in Bennigan’s Franchising subsidiary, which enabled it to prevent the unit from filing for Chapter 7 bankruptcy alongside parent company S&A in July.

Alternative investment firm Atalaya Capital Management has received approval from the US Bankruptcy Court in the Eastern District of Texas to purchase restaurant operator Bennigan’s Franchising Company, effectively buying out the Bennigan’s brand.

Bennigan’s Grill & Tavern is an Irish-influenced US casual dining chain. The transaction, expected to close by the end of the month, also includes the Tavern and Steak & Ale brands.

Bennigan’s parent company S&A Restaurant filed for Chapter 7 bankruptcy protection in July with the franchising unit continuing operations.

“When they filed the company, effectively all they filed was the parent and all of the company-owned stores,” Atalaya managing director Joel Holsinger told PEO. “The franchise entity was never in bankruptcy.”

When S&A went into Chapter 7, which means it will liquidate as opposed to reorganise, the company’s 138 franchises remained opened while more than 150 company-owned eateries were closed. The company has since reopened four company-owned locations and opened four new franchise locations.

“We bought into a security a couple months before the filing, fully aware that it was potentially going to be filing [for bankruptcy],” explained Holsinger. “Through rights we had in that security, because it was kind of a unique security, we were able to use the pledge of stock to vote our shares to replace the officers, put in our officers, and rescind their right to file.”

Holsinger declined to state a purchase price, citing the many components of the purchase which complicate quantification.

Atalaya is working with franchisees to re-open 60 previously closed company-owned locations and to open new franchises domestically and internationally. Of the company-owned outlets which were shut down, roughly 100 were cash-flow viable at the time, said Holsinger.

Bennigan’s is also evaluating a new culinary programme and a repositioning of the brand.

Atalaya Capital Management was founded in March 2006 has offices in New York and Atlanta. The firm has an open-ended fund structure with $450 million in assets under management. Atalaya invests equity and debt in middle market companies up and down the capital structure. The firm’s sector focuses are dining, software, media and telecom which account for about half of its roughly 40 positions.

Casual dining has been a popular investment sector for private equity worldwide despite declining consumer spending. Advent International last month acquired its sixth casual dining chain in Latin America and combined the six companies into platform International Meal Company. In August, San Francisco private equity firm Golden Gate Capital purchased a majority interest in Macaroni Grill. Also this summer, Actis invested $48.5 million in Egyptian fast food company Mo’men Group for Foods and mid-market firm Phoenix Equity Partners backed UK-based Thai restaurant group Busaba Eathai.