Capricorn-backed cookie company crumbles

Private equity-backed Mrs. Fields Famous Brands plans to file for Chapter 11 as declining consumer spending takes its toll. The shopping mall-centred company's Mrs. Fields and TCBY franchise stores have suffered closures since 2004.

Capricorn Investors-backed Mrs. Fields Famous Brands is seeking approval from creditors for its “prepackaged” reorganisation plan prior to filing for Chapter 11 bankruptcy protection, according to a Securities and Exchange Commission filing.

Private equity firm Capricorn acquired Mrs. Fields in 1996 and completed add-on acquisitions including frozen-yogurt chain TCBY for $140 million in 2000 as well as Pretzel Time and Great American Cookie.

In two transactions in August 2007 and January 2008, Pretzel Time and Great American Cookie were sold to NexCen Brands for $110 million.

“We are highly leveraged relative to our cash flow, our liquidity position has been steadily deteriorating and is currently severely restricted,” the company said in a statement. Mrs. Fields will be unable to make interest payments due 15 September.

The company noted in the filing that aggressive competition and declining visits to shopping malls, where most of the franchise stores are located, as having an adverse impact on performance.

Mrs. Fields franchise store closures began at the end of fiscal year 2004. The company said additional store closures may occur in the future and the company may be unable to open new locations.

“The company believes that the restructuring will reduce uncertainty with respect to its future and better position it to develop and maintain new customers,” it said in the filing.

Capricorn's second and third investment funds are affected by the bankruptcy.

Other creditors and shareholder impacted include distressed investors Plainfield Special Situations Master Fund, River Run Management and H Partners Management. Carlyle's first and second distressed investment funds are also stockholders as well as Contrarian Capital Management and event-driven hedge fund Perry Partners International. Corporate credit fund GSC Partners CDO Fund II rounds out the parties named by the filing.

The US's slowing economy has driven a number of consumer companies into Chapter 11 including TA Associates-backed clothing retailer Steve & Barry's and Apollo Global Management's Linens 'n Things.