Lena Brands - Chapter 11 Case Summary

Business Description

Lena Brands LLC (“Lena Brands”), along with its Debtor affiliates (collectively, the “Debtors”), operates a family-dining restaurant enterprise under the Shari’s and Coco’s Bakery Restaurants brands.

• The Debtors currently operate approximately 11 family-dining restaurants under the Shari's and Coco's brands across California, Washington, and Idaho.
• The Debtors employ approximately 235 individuals at these restaurant locations and at support centers in Oregon and Texas.
• The Debtors' restaurant locations are leased rather than owned.

Organizational Structure

Samuel Nicholas Borgese, the sole member of the Debtors, owns 100% of Lena Holdings LLC (“Lena Holdings”), which serves as the holding company for the Debtors’ restaurant enterprise. Lena Holdings owns 100% of each of its two wholly-owned subsidiaries:

• Lena Brands: The operating company for the Shari's Restaurants and Coco's Bakery Restaurants business.
• Lena Real Estate Holdings LLC ("Lena Real Estate"): The real estate and leasing entity for the Debtors' leased restaurant locations.

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Corporate History

Coco's Bakery Restaurant traces its origins to a small restaurant opened in 1948 along Pacific Coast Highway in Orange County, California, later developing into a Western United States family-dining and bakery concept known for traditional American meals and fresh-baked pies. Shari's began in 1978 in Hermiston, Oregon, as a family-dining concept associated with comfort food, pies, and a distinctive regional footprint in the Pacific Northwest and western states.

• Coco's and Carrows subsequently became related family-dining brands under common ownership, including through Catalina Restaurant Food Management Partners, and later, Gather Intermediate Holdco LLC ("Gather").

The ABC Transaction

• On or about October 17, 2024, Lena Holdings purchased the Shari's and Coco's restaurant operations from Gather (assignment for the benefit of creditors), LLC (the "Gather Assignee"), as assignee for the benefit of Gather's creditors (the "ABC Transaction").
• Since 2022, through Gather Holdings, LLC, Mr. Borgese indirectly holds 100% of the assets of Gather, an entity that has no operations or assets following the assignment to the Gather Assignee.

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Operations Overview

In the ordinary course, the Debtors collect revenue from restaurant sales and third-party delivery platforms and then use those receipts to fund payroll, food and beverage purchases, rent, utilities, insurance, sales taxes, bank fees, and other restaurant-level expenses.

• The Debtors derive a significant portion of their revenue through third-party delivery platforms, including GrubHub and DoorDash.
• The 20-week cash flow forecast prepared in support of the proposed cash collateral order reflects eleven operating stores and projected weekly inflows, consisting primarily of restaurant revenue collections.

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Prepetition Obligations

The Debtors' prepetition capital structure consists of obligations to Libertas Funding, LLC ("Libertas") as the asserted first-priority secured creditor, nine junior merchant cash advance parties, and US Foods, Inc. ("US Foods").

Libertas Funding (First-Priority Secured Creditor)

• In connection with the 2024 ABC Transaction, Lena Holdings assumed approximately $462,000 in outstanding obligations owed by Gather to two Libertas-affiliated funds.
  • Those assumed obligations were evidenced by two Delaware UCC financing statements filed on September 18, 2024, against Lena Holdings, which covered accounts, payment intangibles, letter-of-credit rights, rights to payment, related records, and proceeds.
• On March 26, 2025, Libertas entered into an Agreement of Sale of Future Receipts with each of the Debtors, pursuant to which Libertas purchased $1,716,000 of future receipts for a purchase price of $1,300,000, with a specified percentage of 3.90% and an initial weekly delivery amount of $29,184.
  • The March agreement included reconciliation and adjustment rights, prohibited the Debtors from selling Future Receipts or obtaining additional financing before Libertas received the full completion amount without Libertas's written consent, and granted Libertas a security interest in accounts, payment intangibles, letter-of-credit rights, rights to payment, related records, and proceeds.
  • Concurrently, on March 28, 2025, Libertas filed a UCC financing statement against each of the Debtors covering accounts, receivables, and general intangibles (the "Libertas Collateral").
• On or about July 30, 2025, Libertas rolled the prior obligations under the March 2025 agreement and other obligations, including certain obligations owed to WebBank, into a new Agreement of Sale of Future Receipts (the "Libertas Agreement") with Lena Holdings, et al.
  • The Libertas Agreement provides for an amount sold of $2,192,520, a purchase price of $1,661,000, a specified percentage of 7.75%, and an initial weekly delivery amount of $47,457.
  • Contemporaneously, on August 4, 2025, Libertas filed a UCC financing statement against each of the Debtors covering the Libertas Collateral.
  • The Libertas Agreement grants Libertas Article 9 rights in accounts, payment intangibles, rights to payment, related records, and proceeds, and contains anti-stacking provisions prohibiting the Debtors from selling, transferring, or encumbering Future Receipts or obtaining additional short-term receivables-based or ACH-based financing without Libertas's written authorization.
• The total outstanding balance of the Libertas Agreement as of the Petition Date is approximately $1,661,000.
  • For purposes of these Chapter 11 Cases and the requested cash collateral relief, and subject to negotiation of final terms and satisfactory documentation, Libertas has agreed that the Libertas Agreement shall be characterized as a secured financing obligation and that Libertas’s claims against the Debtors shall be treated as secured claims to the extent of the value of the Libertas Collateral.
  • The Libertas Collateral is presently estimated as of the Petition Date at approximately $650,000, comprised primarily of the frozen Stripe balances and subject to final reconciliation of amounts held by Stripe, DoorDash, and GrubHub.
  • The estimated value of the Libertas Collateral is substantially less than the approximately $1.661 million Libertas secured claim, and the Debtors do not currently identify excess value in the Libertas Collateral to support cash adequate protection payments, an equity cushion, or a superpriority administrative expense claim for junior receivables claimants.

Junior MCA Parties

• From May through October 2025, nine parties (the "Junior MCA Parties") entered into separate agreements with the Debtors, each purporting to purchase a percentage of the Debtors' future receivables in exchange for an upfront purchase price. The Junior MCA Parties are: Fox Funding Group LLC, Thoro Corp, Green Note Capital Partners SPV, LLC ("Green Note"), Immediate Capital Solutions LLC, Cromwell Capital LLC, SQ Advance, G&G Funding Group LLC, Riverside Capital NY, and Cedar Advance LLC.
• The total outstanding balance owed to these nine Junior MCA Parties is approximately $3.034 million.
• Five of the Junior MCA Parties filed or caused to be filed UCC-1 financing statements purporting to secure accounts, receivables, payment rights, and proceeds.
  • Two of these financing statements were filed by CT Corporation System, as representative, and cannot be conclusively tied to a specific Junior MCA Party.
• The Junior MCA agreements are styled as purchases of future receivables and contain features including: (a) fixed repayment obligations requiring the Debtors to remit specified dollar amounts irrespective of actual receivables collected, with certain agreements imposing daily or weekly ACH debits of fixed sums; (b) personal guarantees by Mr. Borgese, as the Debtors' principal; (c) reconciliation provisions that have not been exercised; and (d) UCC-1 financing statements filed by or on behalf of the Junior MCA Parties expressly granting security interests in accounts, proceeds, and other collateral.

US Foods, Inc.

• On or about December 11, 2024, Lena Brands executed a credit application with US Foods, which was approved for a $20,000 credit line on net 14-day ACH terms and granted US Foods a security interest in substantially all of Lena Brands' existing and after-acquired personal property, including accounts, goods, inventory, proceeds, and products thereof.
• In February 2025, US Foods and Lena Holdings entered into a three-year Master Distribution Agreement.
• On August 26, 2025, US Foods filed a UCC financing statement against Lena Brands, which included the assertion of a security interest against inventory.
• On February 24, 2026, Lena Holdings and Lena Brands executed a promissory note in favor of US Foods in the original principal amount of $729,827.62 on account of goods and services delivered and invoiced on or before November 21, 2025, and acknowledging the security interest granted in the credit application.
  • The amount outstanding as of the Petition Date was approximately $715,301.

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Events Leading to Bankruptcy

Assumed Liabilities and Mounting MCA Burden

The Debtors commenced these Chapter 11 Cases because their debt burden had become unsustainable, deprived the business of needed liquidity, and diverted management attention from operations.

• In connection with the ABC Transaction, the Debtors assumed significant liabilities, including approximately $1.5 million in past due rent obligations, approximately $1.45 million in sales tax liabilities, and certain outstanding obligations to two funds affiliated with Libertas.
• To fund these obligations and support ongoing operations, the Debtors obtained funding from Libertas and other MCA lenders. The MCA burden grew to approximately $5.16 million across roughly ten funders (including Libertas), and the resulting balance-sheet constraints ultimately necessitated the commencement of these Chapter 11 Cases.

Stripe Receivable Freeze

For a number of months prior to the Petition Date, the Debtors' management team had been addressing third-party delivery receivable holds triggered when two Junior MCA Parties—Thoro Corp and Immediate Capital Solutions LLC—filed UCC financing statements not only against the Debtors but also against Stripe, Inc. ("Stripe"), the payment processor for GrubHub and DoorDash, purporting to encumber payments to the Debtors that were held at Stripe.

• As of the Petition Date, Stripe has frozen roughly $650,000 in disbursements to the Debtors, materially restricting a critical cash-flow stream and contributing to the need for an expedited bankruptcy filing.
• The frozen funds are believed to constitute property of the Debtors' estates under section 541 of the Bankruptcy Code and Cash Collateral.
• To recover these estate assets, the Debtors are preparing to commence an adversary proceeding seeking turnover under section 542 of the Bankruptcy Code and related emergency relief, including, as appropriate, expedited consideration of a request for temporary restraining order or preliminary injunctive relief under Bankruptcy Rule 7065.

Chapter 11 Filing and Go-Forward Strategy

The Debtors filed for Chapter 11 protection on May 15, 2026, in the U.S. Bankruptcy Court for the District of Delaware, to address MCA obligations in a controlled forum and to implement a five-year payment plan with respect to certain past due priority tax claims pursuant to the Bankruptcy Code, with the goal of emerging from bankruptcy with a restructured balance sheet and a sustainable go-forward financing structure.

• Over the past week, as management has begun to shift its attention from the Debtors' overwhelming prepetition debt burden and the daily issues posed by collection actions, the Debtors have identified opportunities to reduce insurance costs, identified potential insurance refunds, and transitioned to a payroll service with robust controls around the payment of payroll taxes.
• To protect against delay or litigation risk relating to the Stripe turnover efforts, Mr. Borgese is currently in active discussions with multiple parties regarding a $400,000 debtor-in-possession facility. If the Debtors are unable to obtain that facility on acceptable terms and within the necessary timeframe, Mr. Borgese may, subject to appropriate documentation and Court approval, provide a capital infusion himself to bridge the funding need and prevent the loss of going-concern value during the interim period.

First Day Motions

Contemporaneously with the Declaration, the Debtors filed a number of “first day” motions to minimize disruption from the commencement of the Chapter 11 Cases and to preserve estate value, requesting authority to:

• Jointly administer the Debtors’ Chapter 11 Cases;
• Use cash collateral to fund ordinary-course operations and these cases;
• Maintain the Debtors’ cash management system, bank accounts, payment channels, intercompany transactions, and existing business forms;
• Pay prepetition payroll, continue employee benefits, and satisfy related employee obligations;
• Provide adequate assurance for utility services and establish procedures for resolving utility-provider requests;
• Appoint Omni Agent Solutions as claims and noticing agent; and
• File and maintain consolidated creditor lists, redact certain personal identifying information for individual employees, and authorize service on employees through company distribution channels.

The Debtors request authority, but not direction, to incur indebtedness, pay amounts, or satisfy obligations with respect to the relief requested in the First Day Motions.

The Need for Cash Collateral

The Debtors’ cash collateral is the day-to-day operating cash that keeps the Shari’s and Coco’s restaurants open. The Debtors seek authority to use cash collateral to continue operating their restaurants, preserve going-concern value, and fund these Chapter 11 Cases.

• The Debtors propose to use cash collateral solely in accordance with a 20-week cash flow forecast attached to the interim cash collateral order, reflecting the Debtors’ anticipated receipts and disbursements during the 20-week period commencing on the Petition Date.
• Without authority to use cash collateral, the Debtors would face immediate and material disruption to payroll, vendor payments, taxes, insurance, utilities, and other essential expenditures, and would have no practical ability to operate during the interim period, risking the loss of hourly restaurant employees and interruption of food and supply deliveries.
• With the use of cash collateral and the turnover of the receivables currently held at Stripe, the Debtors believe they have sufficient liquidity to fund ongoing business operations and administrative expenses.
• The proposed Adequate Protection Liens and Superpriority Claim are intended to protect Libertas against any actual post-petition diminution in the value of its valid interest in Cash Collateral, while preserving the Carve-Out, Excluded Assets, section 552(b)(1) tracing issues, and all timely Challenge rights.