An investment banker involved in the attempted sale of Jose Garces' restaurants testified Monday that the value of a proposed deal nosedived after two key investors rejected the offer.
Jeff Manning of CohnReznick Capital, retained to sell the chef's troubled empire, said in a U.S. Bankruptcy Court hearing in Camden that Ballard Brands originally offered $14 million to buy the restaurants and catering division, and settle with Garces' three largest vendors. Manning said he fielded six solid offers — one of which, he said, offered Garces a seven-figure salary.
After investors spurned the deal and Garces filed for bankruptcy protection, Ballard cut its offer to about $6.3 million, including $2 million in cash and $2.8 million to pay for gift cards and catering deposits. That offer is expected to become the floor for bids if an auction takes place next month.
Manning said the company could run out of cash by July, the start of a slow season for restaurants.
Jason Spiro, a lawyer for an investor fighting the move to bankruptcy, disputed Manning's account. In an interview, he said the Garces camp never provided detailed information to back up the initial offer.
Spiro's client, investors Tom and Maria Spinner, and another investor, Jim Sorkin, are urging U.S. Bankruptcy Judge Jerrold N. Poslusny to block Garces from taking key restaurants — Amada, Tinto, and Village Whiskey — into bankruptcy.
Attorney Adam Wolper, also representing the Spinners, told the judge that Garces had ignored "the plain contract language" to win approval for bankruptcy during a controversial board meeting last month in which the chef overrode their opposition to proceed with his plan.
But Warren Martin Jr., an attorney for Garces, said the original contract was a product of the "theater of the absurd" and improperly hamstrung Garces' authority.
Poslusny is expected to rule shortly.
Experts agree that any bankruptcy would likely leave investors with little or nothing. Most of the buyout money would go to M&T Bank of Buffalo, N.Y., a secured creditor owed about $7 million. It has liens on Garces' restaurants and his home and farm.
Garces, 45, has blamed his financial woes on the impact of the 2014 closing of the Revel casino in Atlantic City, which housed four successful Garces restaurants, and the recent failure of an Amada restaurant in New York City.
Sorkin, of Center City, and the Spinners, from New Jersey, fear that they will be left out in the cold as unsecured creditors. They sought to block the filings on grounds that Garces needed their backing for the step and failed to obtain it.
Garces, in a sport jacket with pocket square, attended the hearing with nearly a dozen employees — putting faces on what has been a bloodless legal dispute.
Sorkin, part-owner of Julius Silvert & Co., a major Philadelphia food distributor, and Tom Spinner, an insurance executive, also were in the courtroom. They sat on a separate side of the courtroom from Garces, the man they had backed financially.
In a crucial board meeting last month, Garces divided his share in the company into three, which he said gave him the votes necessary to prevail. The Spinners and Sorkins maintain that the chef's maneuver was improper.
Wolper said to the judge Monday that Garces' maneuver was illegal.
Earlier on Monday, Poslusny allowed the Garces camp to give bonuses to about 30 key employees to retain them during the auction and sale.