A Maui restaurant owner who has had a rough time operating different franchise eateries in recent years has filed bankruptcy in an effort to keep Kahului’s International House of Pancakes in business.
HOP 1 Enterprises Inc., which owns Maui’s only IHOP and is led by Ernesto Abarro, sought Chapter 11 protection in U.S. Bankruptcy Court in Honolulu last week.
The company’s plan is to reorganize its debts while maintaining normal operations at the restaurant that employs 58 people and generated $3.6 million in sales last year.
"In order to minimize any loss of value to their businesses, the debtor’s immediate objective is to engage in business as usual … with as little interruption to the debtor’s operations as possible," Abarro said in a written declaration filed in the case.
Abarro could not be reached for comment Tuesday.
The company reported owing $1.3 million to creditors whose claims are not secured by company assets. The company estimated its assets are worth between $100,000 and $500,000.
Abarro said in the filing that bankruptcy was necessary because HOP 1’s biggest creditor, a lender, sought accelerated repayment of a loan while state and federal tax authorities moved to collect overdue taxes.
Chris Muzzi, a local bankruptcy attorney representing HOP 1, said the plan is to pay back the tax debt over time.
The Unemployment Insurance Division of the state Department of Labor and Industrial Relations filed a $23,726 tax lien against HOP 1, according to the filing, which also said the Internal Revenue Service filed nearly $100,000 in tax liens.
HOP 1 reported owing $64,189 to DLIR and $92,751 to the IRS. The company also reported a $464,178 debt to the state Department of Taxation.
The company’s biggest creditor is General Electric Capital Corp. with a $590,089 claim.
HOP 1 acquired the Maui IHOP in 2008 using a $1.3 million GECC loan secured by all the restaurant’s assets, including its lease at Maui Mall. Company assets also were pledged to secure a loan held by another Abarro company, which owned Subway restaurants on Maui, the filing said.
Abarro defaulted on his Subway business loan, and GECC filed a lawsuit in 2011 to recover assets including those tied to IHOP, the filing said. GECC obtained a judgement in 2013. Abarro said the judgment and the tax collection liens posed a threat to IHOP.
Abarro has owned several other restaurants in Hawaii and on the mainland, including a Fatburger on Maui that opened in 2012 but has since closed. A landlord for the restaurant in Pukalani filed an eviction lawsuit against Abarro last year, court records show.
