Four Z'Tejas restaurants to close permanently; five to stay open with bankruptcy filing

The owners of the Z'Tejas restaurant chain hope to reorganize the business two years after acquiring it, according to a Chapter 11 bankruptcy petition filed late Monday.

Cornbread Ventures LP, a partnership based in Austin, filed to reorganize the business in U.S. Bankruptcy Court in Phoenix. The filing followed the closing of four of the Southwestern-inspired restaurants, including three in the Valley, and the collapse of acquisition/investment talks with an unnamed British company.

The company will reorganize around five strong-performing restaurants — three in Arizona and two in Austin. The group's four other restaurants have closed.

Landlords locked the doors of a restaurant on Bethany Home Road in Phoenix on Oct. 20, while the partnership closed three restaurants Oct. 22. They included one in Austin plus a restaurant at Scottsdale Fashion Square and another on Sixth Street in Tempe.

The remaining, operating locations include two restaurants in Austin plus Z'Tejas locations at 10625 N. Tatum Blvd. in Phoenix and 7221 W. Ray Road in Chandler, plus a Mexican-themed Taco Guild Gastropub at 546 E. Osborn Road in Phoenix.

"It appears to be a well-thought-out bankruptcy filing that calls for Z'Tejas to shut down four underperforming locations …  and reorganize around the other five," said Adam Stein-Sapir of Pioneer Funding LLC, a New York firm that buys bankruptcy claims from creditors. "Given that the other five locations are profitable, it seems feasible that they can restructure their obligations and emerge as a strong business while preserving jobs."

The bankruptcy filing statements from Michael Stone, president of Cornbread Ventures, assert that the company's operations already have stabilized and are positioned to have positive cash flow.

After the closures, the restaurant group still employs 227 workers in Arizona and Texas, roughly two-thirds of whom are part-time.

MORE:  LGO Hospitality looks to hire former Z'Tejas employees after closures

The largest unsecured creditor is Sysco Arizona, which is owed about $328,000, followed by Sysco Central Texas ($116,000), Health Care Services Corp. ($37,000) and Arizona Public Service ($26,000).

With operations stabilized, a $500,000 cash infusion and immediate cost savings, Stone said he envisions "meaningful recoveries to all creditors."

The partnership also owes around $1.38 million in principal and interest on a loan to JPMorgan Chase, plus more than $530,000 in a JPMorgan Chase line of credit and in credit cards with the bank.

The bankruptcy filing followed the collapse of talks with the British investor group, "most likely because the cost of shutting down the four underperforming locations outside of bankruptcy would have been prohibitive," Stein-Sapir said.

Cornbread Ventures was formed in July 2015 with an agreement to buy the nine restaurants and other assets from the prior ownership group, which filed for Chapter 11 bankruptcy protection around that time. The purchase closed in October 2015.

Reach the reporter at russ.wiles@arizonarepublic.com or 602-444-8616.

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