Sun doesn’t shine on Taco Day

Sun Capital Partners won't be celebrating its Mexican restaurant portfolio company Chevy's' 'National Taco Day', as more of its investments end up in the bankruptcy courts

Good marketing is, at least in part, about timing. Talk to any ad exec, and it won’t be long before they’re ruefully bemoaning some marvellously creative and original campaign of theirs that was just too far ahead of its time, or fell victim to external circumstances beyond their control.

So, First Round has a great deal of sympathy for turnaround specialist Sun Capital Partners. US-based Mexican-themed restaurant Chevy’s had declared 4 October to be “National Taco Day” – a chance for customers to celebrate the wonders of the estimable corn-based snack, and even pick up a free taco in exchange for a coupon. Sadly for all concerned, however, 4 October also turned out to be the day that Real Mex – Chevy’s’ Sun-backed parent company – filed for Chapter 11 bankruptcy protection.

They do say that food tastes better when you don’t have to pay for it. First Round can’t help wondering whether the same applies if the vendor can’t pay for it?

Unfortunately for Sun, its week swiftly got even worse: less than 24 hours later, Friendly's Ice Cream – another of its portfolio companies – also declared bankruptcy. Not exactly the ideal way to start the month.

Of course, Sun is in the business of turning around ailing companies, so it’s no stranger to the bankruptcy courts. A number of Sun’s portfolio companies have filed for Chapter 11 since 2008, including two from the same fund as Chevy’s – Big 10 Tires and Fluid Routing Solutions, both of which received bankruptcy financing from Sun to ensure it retained control subsequently. 

Whether this will happen with Chevy’s remains to be seen, however: our spies tell us that Chicago-based Z Capital Partners (a major holder of the debt tied to Real Mex) and GE Capital have both offered a competing debtor-in-possession loan.

Either way, Chevy’s will be hoping for slightly better luck if it attempts a second National Taco Day…