Jean and Mark Bernstein’s proposal to keep control of their high-profile cafe chain with a new $2.8 million cash contribution earned Judge David Thuma’s approval during a Thursday hearing in U.S. Bankruptcy Court in Albuquerque, according to their attorney James Askew.
The plan — which Flying Star’s creditors also recently voted to approve — entails an auction of Flying Star’s equity. The Bernsteins will bid $2.8 million to pay down some of the company’s debt and remain at the helm of the company they started. The couple’s court filings say they are “only party which has expressed interest in bidding for the equity in Flying Star at this price.” However, other potential bidders have five days to express interest after Thuma submits his written confirmation order. If others want to bid, an auction will happen 14 days after Thuma’s order is entered. If not, the Bernsteins will submit their bid to the court. The plan becomes effective two weeks after the bid gets approved.
“This means Flying Star is no longer a (Chapter) 11 ‘Debtor,’ but becomes a ‘Reorganized Debtor,'” Askew said in a statement to the Journal. “It is not under Court control, but it does have to implement its Plan.”
Creditors would soon start seeing payments; the proceeds of the bid must be mailed out to creditors by Feb. 3, Askew said.
The bulk of the $2.8 million will go toward Flying Star’s 100-plus “unsecured creditors,” a group that includes many goods and service providers. According to the Bernstein’s plan, those creditors will get an estimated 57 percent of the value of their claims immediately. Some additional distributions over the next two years should boost the total to about 66.3 percent.
The Bernsteins’ intend to pay some of Flying Star’s other creditors, like lenders, in full on an installment basis.
Flying Star’s unsecured creditors committee had previously proposed selling the chain — which has six Albuquerque locations — to Southwest Brands, but shelved that plan last month after the Bernsteins’ dramatically upped their own bid.