The owner of Popeyes Famous Fried Chicken and Church's Fried Chicken has been forced into bankruptcy proceedings by creditors owed nearly $400-million. Creditors led by Canadian Imperial Bank of Commerce and Merrill Lynch & Co. filed an involuntary Chapter 11 petition Thursday in San Antonio, Texas against Al Copeland Enterprises Inc.
The action followed six months of negotiations between Copeland and creditors who bankrolled Copeland's $392-million purchase of Church's in 1989. The creditors said they hope the filing will speed a recapitalization that leads to repayment of $390-million.
Copeland's company responded to the creditors' move by saying it was considering all its options, including contesting the Chapter 11 petition or converting it into a voluntary filing. The company said it was trying to work toward a settlement with its creditors.
Copeland Enterprises operates the second-largest fried chicken chain in the nation behind Kentucky Fried Chicken, with about 2,000 Church's and Popeyes outlets. Annual sales are about $415-million.
Copeland operates about 20 Church's Chicken and Popeye's restaurants in the Tampa Bay area, almost all of them company-owned stores. The company has closed a number of its area Popeyes stores in the past year, and it closed one of its Church's outlets in Largo last week.
The Toronto-based Canadian Imperial Bank loaned Copeland $249-million and Merrill Lynch loaned him $142-million to acquire Church's.
Copeland originally expected to sell high-yield junk bonds to repay the loans. But the junk bond market collapsed, and the economic slowdown put additional pressure on the company's finances.
Eaton Vance Prime Rate Reserves and Pilgrim Prime Rate Trust joined in the involuntary petition, filed in the U.S. Bankruptcy Court for the Western District of Texas.
In a press release, the creditors said their negotiations with Copeland covered their debt only. The Chapter 11 filing affects all creditor claims.
Copeland Enterprises joined a growing list of companies that have run into trouble after being swamped by debts from big buyouts, including Federated Department Stores Inc., Southland Corp., and Doskocil Cos.
_ Staff writer Mark Albright contributed to this report.