Delivery alert

There may be an issue with the delivery of your newspaper. This alert will expire at NaN. Click here for more info.

Recover password

Flying Star files for Chapter 11, shuts SF, Bernalillo restaurants

A sign on the doors of the Flying Star Cafe in Bernalillo on Jan. 30, 2015. (Jim Thompson/Albuquerque Journal)

A sign on the doors of the Flying Star Cafe in Bernalillo on Jan. 30, 2015. (Jim Thompson/Albuquerque Journal)

SANTA FE, N.M. — With an outstanding debt of more than $6.2 million, Albuquerque-based Flying Star Cafe filed for a Chapter 11 business reorganization and closed two of its restaurants Friday.

“This is a challenging market we have here,” said Jean Bernstein, co-owner of the 28-year-old company with husband, Mark. “It has really accelerated our need to make sure we have no underperforming stores.”

Underperforming restaurants in Bernalillo and Santa Fe forced the move, Bernstein said, and both were shut down on Friday.

Flying Star will continue operating as a debtor in possession of its business under a Chapter 11 business reorganization, through which it will attempt to negotiate with its creditors to pay off the outstanding debt. Those plans have the support of St. Louis, Mo.-based US Bank, according to court documents. US Bank is the company’s only creditor with claims secured by cash collateral.

“We’re OK. This was a business decision,” Bernstein said. “It was a tough one but, at the end of the day, it was a well-crafted business decision.”

Headquartered in Albuquerque’s North Valley, the company operated nine Flying Star restaurants until Friday’s two closures, as well as eight Satellite Coffee shops in Albuquerque. All of the Satellite operations will remain open. The company also has a food production business, Rio Chan, that supplies outside customers.

Workers remove furniture and other items from the Flying Star restaurant in Santa Fe's downtown Railyard on Friday. The restaurant is one of two Flying Star locations that closed abruptly as the local chain filed for bankruptcy. (Eddie Moore/Albuquerque Journal)

Workers remove furniture and other items from the Flying Star restaurant in Santa Fe’s downtown Railyard on Friday. The restaurant is one of two Flying Star locations that closed abruptly as the local chain filed for bankruptcy. (Eddie Moore/Albuquerque Journal)

Friday’s closures will result in 39 to 45 lost jobs, leaving Flying Star with 428 employees across the company, Bernstein said. Some of the employees in Bernalillo and Santa Fe are expected to take jobs at one of the remaining five locations in Albuquerque, and one each in Los Ranchos de Albuquerque and Corrales.

“We tried to contain the layoffs as much as possible,” she said.

The issue with the closed locations, besides the fact they were far less successful than the others, was the cost of the long-term leases to rent the properties at 200 South Camino Del Pueblo in Bernalillo, which has been open for six years, and at 500 Market St. at The Railyard in Santa Fe, open five years.

A court document shows the company owes more than $6.2 million to its top 20 creditors, of which more than $4.5 million was owed on the Bernalillo and Santa Fe locations. The Railyard location alone has generated $2.9 million of Flying Star’s debt.

Flying Star has not yet filed with bankruptcy court a list of assets and liabilities, thus the company’s full amount of outstanding debt is not yet known. Bernstein affirmed it would be higher than the $6.2 million listed in the petition.

The Santa Fe Flying Star, which opened in 2009, was one of the first anchor businesses in the city-owned Railyard.

Richard Czoski, executive director of the nonprofit corporation that manages the Railyard for city government, said, “It’s always unfortunate to lose a great tenant like Flying Star, in their case especially because they’d weathered the recession.”

Flying Star Cafe located at Paseo del Norte and Wyoming NE on July 6, 2014. (Adolphe Pierre-Louis/Albuquerque Journal)

Flying Star Cafe located at Paseo del Norte and Wyoming NE on July 6, 2014. (Adolphe Pierre-Louis/Albuquerque Journal)

Plans for an adjacent movie theater didn’t come through until Austin-based Violet Crown Cinema started construction last year. “It’s too bad Flying Star couldn’t last for the new cinema,” Czoski added.

But he doesn’t expect the restaurant space, which actually is owned and leased out by private developers Railyard Co. LLC, to be vacant for long. “There’s a lot of restaurant interest in the Railyard,” Czoski said.

Steve Duran of Railyard Co. was surprised to learn he was losing a major tenant when a Journal reporter called Friday. He groaned and said a note on the Flying Star door had said it was closed just for maintenance.

The restaurant closing in Bernalillo is a setback for the town, said Mayor Jack Torres.

“Obviously, that’s a call we had no control over. (Flying Star) was a nice option,” he said. “When you lose a business in any community, especially a small community, it’s a sad occasion. Hopefully, we can find a new business to locate in the building.”

TOP |