Cosi gets bankruptcy dismissal to seek relief from Covid (1)
Cosi Inc. convinced a court to dismiss its Chapter 11 case, allowing the fast-casual restaurant chain to seek a new federal relief program for the restaurant industry, which is largely not accessible to bankrupt companies.
The company’s urgent request to dismiss the case is unusual but rational, Judge Brendan L. Shannon of the US District Bankruptcy Court of Delaware said in a hearing on Tuesday. The judge, approving the company’s petition, noted that Cosi was not eligible to apply for a grant from the Restaurant Revitalization Fund until his reorganization plan was confirmed.
The $ 28.6 billion RRF relief fund, part of the $ 1.9 trillion Covid relief program passed by Congress in March, offers restaurants grants of up to $ 10 million. Cosi tried to speed up its bankruptcy case earlier this month to apply for the grant, hoping that an interim confirmation of its plan by a court would make the company eligible.
But the Small Business Administration, which administers the fund, informed Cosi on May 7 that approving the interim plan would not be enough. Under agency policy, companies that have declared bankruptcy cannot seek redress unless they have a plan confirmed by the court.
It was the second time since Cosi filed for bankruptcy in February 2020 that the SBA has rejected his Covid compensation claim.
Cosi attempted early in her bankruptcy to obtain a loan under the CARES Act Paycheck Protection Program, but the SBA denied the request because the company was in Chapter 11.
The rejection of PPP was “a punch” and the rejection of RRF “was the upper jaw cut that put us on the web,” said Cosi’s attorney, Mark E. Felger of Cozen O’Connor , during the hearing on Tuesday.
RRF funds will likely be depleted if Cosi does not immediately queue her application, Felger said. Cosi will apply to the program as soon as his case is rejected, he said.
The SBA’s policy on eligibility for RRF grants is the same as for PPP loans. The agency updated its guidelines in April to allow businesses with court-approved bankruptcy plans to apply for PPP loans.
The SBA is not taking any position on the steps Cosi has taken to close the case, Dominique Sinesi, a Justice Department lawyer representing the SBA, told court.
Shannon also gave her preliminary approval to Cosi’s disclosure statement, allowing the company to solicit votes on their plan out of court. The judge also agreed to resume the case later with five days’ notice if Cosi so requests.
“Go ahead and apply, and good luck with the application,” Shannon said.
Cosi’s lenders and commercial creditors also supported the emergency layoff.
The case is In re Cosi, Inc., Bankr. D. Del., N ° 20-10417, hearing of 05/11/21.