Bennigan's, Steak & Ale file for bankruptcy

By Lisa Baertlein

LOS ANGELES (Reuters) - The company behind the Bennigan's and Steak & Ale chains filed for one of the largest restaurant bankruptcies ever on Tuesday, closing outlets and cutting jobs.

S&A Restaurant Corp, and three dozen other entities including various Bennigan's and Steak & Ale affiliates, submitted Chapter 7 bankruptcy petitions in the U.S. Bankruptcy Court for the Eastern District of Texas, seeking to sell assets.

The company is a subsidiary of Metromedia Restaurant Group and operates and franchises Bennigan's and Steak & Ale restaurants. The companies fall under the umbrella of billionaire John Kluge's privately held Metromedia Co.

Bennigan's Grill & Tavern was founded in 1976 and has restaurants in 32 states. Steak & Ale was founded in 1966.

Bennigan's has roughly 300 restaurants in its chain, and only company-owned restaurants appear to be affected by closures. An official restaurant count for Steak & Ale was not immediately available.

Bennigan's Franchising Co, owner of the Bennigan's and Steak & Ale trademarks and franchise agreements, said it was not part of the Chapter 7 filing. The company, which represents all domestic and international franchisee-owned restaurants, said its 138 Bennigan's restaurants "remain open and fully operational."

The bankruptcy filing also does not include Ponderosa and Bonanza, which operate under Metromedia Steakhouses Co LP, S&A spokeswoman Leah Templeton said.

The move by S&A underscores how economic weakness and rising costs in the United States are squeezing mid-tier restaurants. Many of those restaurant chains have grappled with higher food and labor costs while U.S. consumers are trying to cope with higher grocery and gas bills.

"It's tough times. I don't think it's out of the realm of possibility that there will be other casualties," said Bob Goldin, executive vice president at restaurant consulting firm Technomic.

While companies often file for Chapter 11 bankruptcy protection which allows them to restructure while holding creditors at bay, S&A filed for Chapter 7 bankruptcy, which allows them to liquidate assets.

LOTS OF BURGERS ... AND FLAIR

Restaurants & Institutions, an industry magazine, said in a July 1 article that at the end of 2007 Bennigan's had 290 restaurants and $652.5 million in sales, while Steak and Ale had $93.5 million in sales from 55 outlets.

Representatives from S&A did not respond to multiple requests for the exact number of restaurants to be closed and how many employees would be affected.

Bennigan's employees were known for their cheerful birthday singing and "flair" -- decorations worn on their uniforms.

Managers at company-owned Bennigan's locations throughout the United States, including Chicago, New Jersey, Miami and the Dallas area, all said their company-owned restaurants were closed. An employee at an Atlanta Steak & Ale told Reuters that store had been closed.

In June, Metromedia Restaurant Group said it was working on a debt restructuring plan.

That announcement came after the Wall Street Journal said the company was in talks with lender GE Capital Solutions and that it had prepared a bankruptcy filing in the event it was needed.

"In light of today's filing, we are reviewing our options and we have worked cooperatively and constructively with Metromedia in arriving at a solution that takes into account the rights and obligations of interested parties," said Stephen White, a spokesman for General Electric Co's (GE.N: 行情) capital solutions unit. That GE unit provided leasing and secured financing on about 90 of the company's 750 restaurants.

GE declined to disclose the amount of Metromedia's debt.