• Debtors say cash constraints caused by COVID-19 closures, increasing costs
• Cerca Trova is also facing a USD 1.6m class action judgment and other pending cases
• Company plans to sell substantially all assets to franchisor Outback Steakhouse of Florida

Cerca Trova Restaurant Group Holdings, which operates Outback Steakhouse locations across five states, filed for bankruptcy today (2 November) with a USD 5.5m DIP facility and stalking horse bid from its franchisor.

David Goronkin, the debtors’ chief executive officer, told the US Bankruptcy Court for the District of Delaware in his first-day declaration that the company faced liquidity strain as a result of higher minimum wage laws, increasing inflation, and lower foot traffic. According to Gorokin, Cerca Trova plans to continue operations and keep restaurants open throughout the bankruptcy process using its proposed postpetition financing.

“The Restaurants have served their communities across five (5) states for more than three (3) decades,” Gorokin said. “With the support of the Court and their stakeholders, the Debtors hope that these chapter 11 cases will allow the Restaurants to continue to do so under new ownership.”

The case has been assigned to Judge Craig Goldblatt, and a first-day hearing has been set for Tuesday (3 November) at 5pm ET.

Debtwire Dockets: Cerca Trova Restaurant Group Holdings (Access Required)

The company

Founded in 1994, the company started out as T-Bird Restaurant Group to build out the Outback Steakhouse footprint in California. Twenty years later, in 2014, the company had expanded to 56 restaurant locations in the state.

After being acquired by H.I.G Capital in 2015, the debtors worked to buy 45 operating Outback locations across Arizona, Colorado, Nevada, and New Mexico for USD 31.3m from franchisor Outback Steakhouse of Florida, a subsidiary of Bloomin’ Brands. This purchase made the debtors the operators of 99 restaurants and the exclusive developer of Outback locations across all five states. Following the purchase, the company rebranded as Cerca Trova and merged its restaurant partnerships with debtors Cerva Trova Steakhouse.

Each of the debtors’ Outback locations is led by a management partner and a joint venture partner, whose compensation is tied to restaurant profits. The debtors do not own any property, as the restaurants are all on leased premises.

The debt

Cerca Trova currently holds USD 319.9m in prepetition secured obligations under a credit agreement, as well as USD 13.9m under a deferred payment agreement with their franchisor.

The outstanding amount under the prepetition credit agreement with Goldman Sachs Specialty Lending Group and its affiliates is made up of USD 122.5m in principal term loans and USD 6.5m in revolving loans, plus USD 190.9m in interest, fees and other obligations.

As for the money owed under the deferred franchisor payment agreement, Cerca Trova plans to fully repay the franchisor after the proposed asset sale closes.

In addition to the secured loans, the company also estimates that they owe around USD 27m in unsecured claims.

The descent 

Goronkin told the court in his declaration that Cerca Trova took on debt to finance the company’s expansion across the West, and when faced with increasing costs as a result of minimum wage increases and inflation, as well as a COVID-related decrease in customer traffic, the debtors were unable to satisfy their obligations.

Cerca Trova was unable to refinance its senior loans when they matured in April 2022, and has been operating under forbearance agreements since, according to Goronkin.

The debtors attempted to sell the company four times since 2018, with the first three proposals falling through as financial performance declined. Goronkin added that Cerca Trova also closed 13 underperforming restaurants before filing for Chapter 11 in an attempt to solve liquidating issues.

The company is also facing several class action cases in California from previous employees, one of which requires a USD 1.6m payment following an August 2026 ruling. Two class actions related to wage-and-hour claims are still pending in California courts, as well as three other cases related to accessibilities, gift cards, and more.
As of the petition date, Goronkin said that the debtors only have USD 3.4m on hand, down from USD 9.7m at the end of 2023.

The Chapter 11 cases

Cerva Trova submitted a Chapter 11 petition today, hoping to sell all of their restaurant assets back to franchisor Outback Steakhouse of Florida for USD 26.3m.

In order to fund operations through the sale process, Cerva Trova has secured an interest-free USD 5.5m DIP facility from the franchisor. Once the sale closes, Goronkin said that the DIP will be credited against the purchase price.

Under the proposed bidding procedures, the deadline for competing bids is set for 8 December, followed by an 11 December auction if needed and a 15 December sale hearing.

The advisors