ST. LOUIS Krispy Kreme franchisee Sweet Traditions, which filed for bankruptcy last year, reportedly is selling 21 units to its sole shareholder Allied Capital Corp.
The franchisee, based here, also is selling one store in Summit, Ill., to Fifth Third Bank, according to a report in the Chicago Sun-Times. It was unclear whether the stores being sold would remain doughnut shops.
Sweet Traditions, which operates Krispy Kreme shops in Illinois, Indiana and Missouri, filed for Chapter 11 bankruptcy protection last September and closed several underperforming units. If the deal with Washington, D.C.-based Allied Capital is approved in court next month as expected, the shareholder will assume $27 million in liabilities, the report said.
Allied previously gave Sweet Traditions $700,000 in debtor-in-possession financing after the bankruptcy filing. In 2006, it invested $36.5 million in a recapitalization.
Franchisor Krispy Kreme of Winston-Salem, N.C., has been plagued with accounting problems, a lagging stock price and falling sales. The company said Monday that chairman James Morgan assumed the chief executive position, replacing Daryl Brewster, who resigned.