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Boston Chicken belly up
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October 5, 1998: 10:44 a.m. ET
Chicken chain files for bankruptcy protection, closes 178 restaurants
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NEW YORK (CNNfn) - After dismissing investor jitters in May as unfounded, fast-food restaurant chain Boston Chicken said Monday it filed for Chapter 11 bankruptcy protection and closed 178 Boston Market restaurants.
The Golden, Colo.-based company and its 14 Boston Market subsidiaries filed for creditor protection Monday in U.S. Bankruptcy Court for the District of Arizona in Phoenix.
Boston Chicken also said it received a commitment from a group of lenders led by General Electric Capital Corp. and Bank of America for up to $70 million in debtor-in-possession (DIP) financing. The money will be used to refinance up to $35 million of existing senior debt and give the company access to up to $35 million of additional working capital, if needed, to pay salaries and employee benefits, among other things.
In addition, the company said it is in discussions with its senior creditors and other parties for long-term financing to support the company's business plan if and when it emerges from Chapter 11.
"We had hoped to restructure out of court and gave it our best effort," said J. Michael Jenkins, Boston Chicken chairman, president and chief executive officer. "We have considerably improved restaurant operations, significantly reduced overhead, and have made progress with our creditors toward a financial restructuring."
He added Boston Chicken filed for Chapter. 11 "because we realized we wouldn't be able to complete our restructuring plan by Oct. 17."
About $283 million of Boston Chicken's senior debt comes due then.
More than 950 Boston Market restaurants in nearly 90 cities nationwide remain open. The company also owns a majority stake in Einstein/Noah Bagel Corp.
Shares of the company [BOST] were down 1/16 Monday morning, or more than 8 percent, at 11/16 on the Nasdaq, not far off their 52-week low of 5/8 set earlier this month.
(Click here for a chart of Boston Chicken's stock activity)
In May, the Arthur Andersen accounting firm filed an auditor's report with the Securities and Exchange Commission stating that Boston Chicken's financial situation "raises substantial doubt about its ability to continue as a going concern."
Arthur Andersen said Boston Chicken "may not generate sufficient liquidity to meet its financial obligations."
Following the report, shares of Boston Chicken plunged nearly 37 percent to 2-1/32 on Nasdaq.
At the time, Boston Chicken officials dismissed investor fears as unfounded, calling the stock sell-off "over reaction" to the auditor's report. 
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Boston Chicken
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