Creditors of Emersons Ltd. have approved a plan for bringing the steak house chain out of bankruptcy that calls for selling several of the restaurants and paying creditors about 7.5 cents on the dollar.
As many as seven of the 17 Emersons Steakhouses will be sold to raise $750,000 to settle the complicated financial affiars of the chain, which is reorganizing undeer Chapter XI of the federal bankruptcy laws.
The plan was approved by a majority of the chain's creditors and accepted by the federal bankruptcy court in Maryland, where the case is being handled.
The arrangement calls for Emersons to be taken over by a group of new investors, including Steve Rubell, owner of the Studio 54 disco in New York, and David Geffen, former chairman of Electra Asylum Records.
Partners of Geffen and Rubell in the deal are Richard M. Cohen and Morris Weissman, two New York investors who are the top officers of several companies including U.S. Banknote Corp, GIT Industries Inc. and Midcon Industries Inc.
The four have agreed to invest up to $200,000 in Emersons and to take responsibility for refurbishing the restaurants.
Another $750,000 is to be raised by selling some of the restaurants. Up to seven will be sold, if it requires that many to raise the needed cash a spokesman for Emersons said.
No decision has been made on which Emersons steakhouses will be sold, he added. The Emersons name will be dropped from all the restaurants when the new owners take over.
The plan for bringing Emersons out of bankruptcy is expected to be completed in September, but several other actions must come first, including the sale of the restaurants, approval by stockholders of issuance of additional shares and settling claims with secured creditors.
The additional stock would be issued to the Rubell-Geffen group in return for their investment in the company. The group already owns about 28 percent of Emersons' shares.
Emersons' unsecured creditors are owed more than $10 million by the company. The plan calls for giving the creditors an $800,000 note, payable over several years.