UPDATE 2-Krispy Kreme seeks creditor protection for KremeKo
Fri Apr 15, 2005 06:23 PM ET
LOS ANGELES, April 15 (Reuters) - Krispy Kreme Doughnuts Inc. (KKD.N: Quote, Profile, Research) on Friday said the company with exclusive rights to open its doughnut shops in most of Canada filed for protection from its creditors.
In a statement, Krispy Kreme said KremeKo Inc., in which it has a 40.6 percent stake, filed an application in Ontario Superior Court to restructure under Canada's Companies' Creditors Arrangement Act.
Krispy Kreme has agreed to provide an unspecified amount of debtor-in-possession financing to fund the company's operations throughout the restructuring.
A spokeswoman was not immediately available to provide further details.
KremeKo has the right to develop Krispy Kreme stores in all Canadian provinces except British Columbia. It currently has about a dozen stores in Ontario, Quebec and Alberta.
Krispy Kreme, based in Winston-Salem, North Carolina, has been hard-hit in the last year by a falloff in sales of its signature doughnuts, a U.S. Securities and Exchange Commission investigation into its accounting and an earnings restatement.
Krispy Kreme has not filed any financial statements since last year due in part to an ongoing probe into the way it accounted for the consolidation of KremeKo.
The company received some reprieve earlier this month in the form of a $225 million loan that helped it avert a looming cash crunch and the threat of bankruptcy.
Speculation about the company's struggling franchisees, however, has led to concerns among investors about how much Krispy Kreme could be responsible for to cover bad loans made to those entities.
The former Wall Street darling's shares have slumped nearly 80 percent in the last year. They slid another 19 cents, or 2.5 percent, on Friday to close at $7.56.
yahoo.reuters.com
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