Burger and ice cream chain Friendly's is close to filing for bankruptcy and may try to sell itself at auction, the Wall Street Journal reported on Thursday.
The Wilbraham, Massachusetts-based restaurant chain may file for bankruptcy as early as next week and is in talks with Wells Fargo & Co on a $70 million loan to keep it afloat during the process, the Journal reported, citing sources familiar with the matter.
A spokeswoman for Friendly's did not immediately have a comment. Calls to Friendly's owner, Sun Capital Partners Inc, were not returned on Thursday.
A spokeswoman for Wells Fargo declined to comment on the report.
According to the report, under bankruptcy, Friendly's would roll some of its existing debt into a new loan from Wells Fargo. The loan would also include $25 million in new funds. Friendly's would seek an auction to sell itself out of bankruptcy, the report said.
Friendly's has retained law firm Kirkland & Ellis and turnaround firm Zolfo Cooper, the Journal said. Calls to both firms were not returned Thursday.
Friendly's would be the latest in a number of restaurant chains, including Sbarro, Fuddruckers and Charlie Brown's Steakhouse, to file for bankruptcy because of the economic downturn and a drop in consumer spending.
Sbarro is currently in bankruptcy in New York, where it will either sell itself to the highest bidder or restructure the bulk of its $395 million debt load.
(Reporting by Nick Brown; Editing by Gary Hill)