Spicy Pickle defaults on loans

Submitted by admin on Sun, 02/19/2012 - 11:11am

Denver CO – February 19, 2012 (www.hospitalitybusinessnews.com) According to SEC filings, on February 2, 2012, Lenders to Spicy Pickle gave the company notice of the occurrence of an event of default under its promissory notes secured by all of the company’s assets and declared that the entire unpaid principal balance of the notes and all accrued and unpaid interest thereon was immediately due and payable.  

Spicy Pickle was unable to pay the lenders in full by the February 3, 2012 deadline. As such the Lenders gave notice that they would sell the registrant’s assets to the highest qualified bidder in a public sale to be held on February 21, 2012 at 10:00 a.m. Mountain Time at the offices of Davis Graham & Stubbs LLP in Denver, Colorado.  

The loans in question are as follows:

·    

Convertible promissory note dated September 30, 2009, as amended on May 10, 2010, issued in favor of Presley Reed in the principal amount of $509,594.79;

·    

Convertible promissory note dated September 30, 2009, as amended on May 10, 2010, in favor of the BonAnnos in the principal amount of $307,656.89;

 

·    

Convertible promissory note dated May 10, 2010 in favor of the Reeds in the principal amount of $2,000,000;

·    

Convertible promissory note dated April 15, 2011 in favor of the Reeds in the principal amount of $500,000;

 

·    

Convertible promissory note dated April 15, 2011 in favor of the BonAnnos in the principal amount of $500,000;

·    

Senior secured promissory note dated December 5, 2011 in favor of the Reeds in the principal amount of $1,160,000; and

 

·    

Senior secured promissory note dated December 5, 2011 in favor of the BonAnnos in the principal amount of $290,000

The event of default stemmed from a $335,000 bad debt charge taken against operations when one of the company’s debtors informed Spicy Pickle that it would not be able to pay the receivable owed to the company.  The resulting loss for the quarter ended December 31, 2011 exceeded the amount allowable in its loan covenants.

The Reeds demanded immediate payment of $3,793,028.81, which includes the aggregate outstanding principal of $3,439,594.79 and accrued interest as of February 1, 2012 of $353,434.02, plus collection costs.

The BonAnnos also demanded immediate payment of $969,843.68, which includes the aggregate outstanding principal of $907,656.89 and accrued interest as of February 1, 2012 of $62,186.79, plus collection costs.

The first Spicy Pickle restaurant was launched in 1999 by two individuals under the name Spicy Pickle, LLC. In late 2001, there were three restaurants, two in Denver and one in Lakewood, a Denver suburb.  By January 2003, Spicy Pickle Franchising, LLC was incorporated and the company launched the Spicy Pickle brand as a national franchise.

As of September 30, 2011, the company had 22 franchised Spicy Pickle restaurants and seven company-owned Spicy Pickle restaurants opened.  Previously co-located with one of the restaurants was a bakery which provided fresh baked breads to the local area Denver restaurants.  On December 31, 2010 the bakery closed.  Bread is now baked system wide in the restaurants.

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