Bankruptcy for Sbarro

April 4/New York/New York Times -- Sbarro, the private-equity-owned pizza chain, filed for Chapter 11 as it moves to cut its debt and restructure its balance sheet.

The bankruptcy, according to a court filing, will allow Sbarro to reduce its debt by $195 million, or more than half. The company will also get a $30 million capital infusion.

"Sbarro is a strong company with an unsustainable balance sheet," the company said in the filing. "Sbarro intends to emerge expeditiously from Chapter 11 as a stronger, well-capitalized and more competitive company."

Founded in 1956 as a Italian grocery store in New York, Sbarro evolved into an Italian restaurant chain, with its first mall location in 1967. Today, the company, which was taken private in 2007 by MidOcean, has 1,045 locations in 42 countries.

Shortly after the buyout, Sbarro was affected by rising food costs and the global economic crisis. The price of ingredients like cheese and flour surged in 2007 and 2008, just as mall traffic began to fall off during the recession. It never recovered. The company expects to earn $30 million in fiscal 2011, down from roughly $38 million last year.

During the bankruptcy proceedings, Sbarro said its locations would continue to operate and customers would still be able to use their gift cards and coupons.

From the April 5, 2011, Prepared Foods' Daily News