By Sean Pendergast
By Sean Pendergast
By Sean Pendergast
By Jeff Balke
By Richard Connelly
By Jeff Balke
By Casey Michel
By Craig Hlavaty
At one point, backs against the wall, RioStar borrowed $2 million at 20 percent interest.
"We needed financing desperately, long-term financing, but we never could arrange for it. Many times we tried, we went up to New York a couple of times and tried to arrange for big financing: 15 million, 20 million," says Roland. Pre-bankruptcy, Morgan and Roland talked about a financing deal. "We just couldn't get it done."
By October 1996, RioStar owed Sysco, its largest food and equipment supplier, $2.8 million, and after five years in which 140 RioStar checks bounced, Sysco forced the company into Chapter 7 bankruptcy. Ninfa's responded by filing suit against Sysco for allegedly overcharging for supplies (Mama later dropped the suit and issued an apology), and filed for reorganization under Chapter 11 of the bankruptcy laws, to give the family just a little bit of breathing room, an opportunity to somehow reorganize the piling-up debt. That's also when Mama herself discovered how deep a hole the family was in.
"We had been struggling for some time with our finances, so I'm sure that was always in the back of our mind: 'Are we going to be able to make it?' But to me it was a great shock, very much so. In '95, early '96, I was very ill for several months, so I really wasn't involved on a day-to-day basis. My job was really in the area of PR, you know, it wasn't in management. I was aware that there were some difficulties, but I think the guys tried to protect me from a lot of that."
What the guys couldn't protect Mama from was the suitors.
There were five of them, restaurateurs Tony Vallone and Ghulam Bombaywala, a partnership of Dallas investor Larry Leal and Black-Eyed Pea owner Gene Street, and Serranos and Morgan, who originally made separate offers.
"We could have bought it ourselves, reorganized it and paid off our debts," Roland speculates, "but we had lost credibility."
All the suitors had plans, but in the end, it was the plan presented by the partnership of Serranos and Morgan that was approved by the creditor committee and the Laurenzos themselves, and accepted by Judge William Greendyke. Theirs was the plan that offered to pay 100 cents on the dollar to RioStar's creditors, though it's not precisely 100 cents on the dollar, because it could be a decade or more before the last creditor is, as they say, satisfied. There has been some grumbling -- again officially nameless (such a polite brouhaha...) -- to the effect that much of the money is spread too thin, payable in percentages of projected profits, and that little of it is in actual equity. Morgan got himself a sweetheart deal, is the word on the street, and maybe he did. Now he and his partners have a struggling chain to rehabilitate, a lot of financial obligations over a long haul, and the incoming licensing fees of some dozen Mexican-food restaurants carrying the Ninfa's name but under little obligation to bring themselves in line with any new and improved management attempts at consistency of quality.
Mama Ninfa, and through her, her family, came out not so bad, too. She retains an investor's interest in two licensed Houston Ninfa's, one at the Park Shops and another inside the Galleria. She retains the right, transferable to her children, to license and open as many as six new Ninfa's restaurants, and her sons Tommy and Gino have already taken advantage of the opportunity, opening Austin's first Ninfa's in 1997.
According to the Second Amended Joint Plan of Reorganization that effected the sale (one of almost 2,000 documents on file at the Federal Building pertaining to the extremely complex bankruptcy proceedings), Mama herself gets paid, by Morgan's group, $16,500 a month for 1998, $15,500 a month for 1999, $14,500 a month for 2000, $13,500 a month for 2001, $12,500 a month for 2002, $8,500 a month for 2003, $7,500 a month for 2004, and $6,666.67 a month thereafter, as long as she might live.
For this money she is expected to do next to nothing aside from being available as a spokesperson for the Ninfa's she no longer owns and adhering to a non-compete clause stating that she shall "not engage, directly or indirectly, as a consultant, employee, officer, director, owner, shareholder or investor in any business which owns, operates, provides or designs restaurants, cafes, bars, catering services, food delivery, or any other food business...," etc. etc.
It sounds like the legal language of someone with a sincere and thorough interest in making sure that Mama Ninfa doesn't compete.
"Because she's a local personality," says Morgan, "the non-compete part is very important, and her being identified with the company as a real person. An actual presence."
"It's very limited," says Mama Ninfa, "because I'm not involved in management anymore, at all. So I'm not notified about nothing. These people that have come in are very nice people, from what contact I've had with them. At Serranos and Mr. Morgan too. All of them have been very decent with me. But I'm sure they have their own management style that they want to implement, their own ideas, so I don't think to tell them anymore. They're not going to go by what I say, let's say, or what I would want, or what I would like in the way of dealing with everyone at the company, or dealing with my ideas."
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