Uno Bankrupt

Note to self: retailers and restaurants with inferior products and heavy debt loads will go bankrupt.

Deep Dish Trouble: Owner of Pizzeria Uno Files For Bankruptcy Detection

Massachusetts-based Uno Restaurant Holdings Corp., owners of the Pizzeria Uno restaurant chain, filed for Chapter 11 bankruptcy protection Wednesday. As part of its restructuring, the company has agreed to convert $142 million in senior secured debt into a 96% equity stake in the company, giving it what Uno's website refers to as the "resources to invest in its growth opportunities."

While this may sound like good news to fans of the chain, the truth is a bit more complex: Based on recent expansion moves, it looks like further growth will not improve the quality of the pizza.

When Uno emerges from bankruptcy court protection in 90 to 120 days, its financial future looks optimistic. It has reached an agreement with bondholders and is seeking court approval for $52 million in debtor-in-possession financing from Wells Fargo (WFC). While it claims that lowered discretionary spending and higher commodity costs resulted in a 2009 loss of $22.2 million, the company still had impressive revenues of more than $286 million. At the same time, Uno also launched a massive expansion late last year.

In fact, part of Uno's $142 million debt is attributable to its bright prospects: In 2005, an investment firm, Centre Partners Management LLC, assumed the debt as part of a plan to consolidate ownership of the company. Under the bankruptcy, however, Centre Partners' interest in the chain will be eliminated, as will Uno Chairman Aaron Spencer's part ownership.

One big question is how the Uno bankruptcy will affect the pizza. After all, "restructuring" and "expansion" often go hand-in-hand with cheaper ingredients and lowered standards. Chicagoans, who tend to be rabid in their support of the brand, don't have anything to worry about: When Florence Sewell, wife of the original owner, sold the chain in 1992, the buyers had to agree that they would not change the pizza at the original four Chicago locations.