Exhibit 99.13
August 28, 2000
Dear Members of the Official Unsecured Creditors Committee of Einstein/Noah
Bagel Corp.:
We have been attempting to reach out to you to propose a plan which would
maximize recovery to the unsecured creditors of Einstein/Noah Bagel Corp. and
Einstein/Noah Bagel Partners, L.P. (together "Einstein"). On June 21, 2000 we
offered a proposal that we believed, and continue to believe, offers superior
value to the creditors of Einstein compared to the proposal currently described
in the August 7, 2000 Disclosure Statement. Both before and after receipt of our
proposal, we were told on numerous occasions by various members of the Official
Committee of the Unsecured Creditors ("Committee") and their advisors, that
discussions with us on our offer would begin immediately upon resolution of the
Bagel Funding litigation. Such discussions have yet to start, however, which
leaves us disappointed that we have not been able to engage the Committee in a
dialogue to deliver substantial additional value to creditors.
I would like to note that New World Coffee - Manhattan Bagel, Inc. ("New
World") is a very significant creditor and owns over $20 million in principal
amount of the 7.25% Convertible Subordinated Debentures ("Debentures"). Further,
other holders owning a significant amount of Debentures have indicated to us
that they will follow our lead in this case.
We continue to be strongly of the belief that a combination of New World
and Einstein will provide superior value for all parties. With this letter we
offer a revised proposal which provides an objectively higher recovery to the
unsecured creditors ("Unsecured").
EXISTING EINSTEIN PLAN
The Debtor's disclosure statement provides an enterprise value of
reorganized standalone Einstein of approximately $125 - $160 million based on an
analysis by Donaldson, Lufkin & Jenrette ("DLJ"), or an implied EBITDA multiple
range of 4.8 - 6.2 on projected 2000 Einstein EBITDA of $26 million. The
standalone plan provides for distribution to the Unsecured of 89% the equity of
the reorganized entity, with the balance distributed to Bagel Store Development
Funding, LLC. Assuming senior debt of approximately $45 million at confirmation,
the value of the recovery to the Unsecured ranges from $71 - $102 million or 57%
- 82% of the principal amount of the Debentures, with a midrange of 70% or $87
million.
PROPOSED NEW WORLD PLAN
Our alternative plan would combine Einstein with New World to create a
stronger entity. We are prepared to offer 100% of principal amount of the
Debentures in any combination of debt and equity securities the Committee may
find acceptable. We believe a combination of debt and equity securities along
the following lines would be appropriate.
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New World would provide for the Unsecured to be repaid with a new $55
million Senior Subordinated Note ("Note") and 45% of the equity stake in the
combined entity. Based on (a) Einstein's projected 2000 EBITDA of $26 million,
plus New World's projected EBITDA/ immediate synergies of $24 million, (b)
multiples of 4.8 - 6.2 times EBITDA per the DLJ analysis, (c) Einstein's
estimated senior debt of $45 million, plus New World debt of $19 million, the
value of the recovery to the Unsecured ranges from $110 - $140 million or 88% -
112% of the face amount of the Debentures, with a midrange of 100% or $125
million, an increase of 44% from the Einstein plan.
I would like to review the substantial additional benefits of the New World
plan, as follows:
- The New World Plan grants the Unsecured a substantially stronger
position in the go forward capital structure, reducing their credit
risk.
- The New World Plan enhances the Unsecured's liquidity, by providing a
substantial portion of their recovery through the Note.
- The New World Plan provides upside participation in the success of the
combined entity through a significant equity stake. Also, it reduces
unnatural holder overhang, thereby dramatically improving the
liquidity and value of such equity.
- The New World Plan creates a small-cap (vs. micro-cap) equity, which
should be more attractive institutionally, again positively impacting
the value and marketability of the new equity.
- The Unsecured's recovery in the New World Plan is significantly less
exposed to dilution from management options.
I look forward to the opportunity to meet with the Committee at your
earliest convenience to discuss this proposal in further detail.
Sincerely,
/s/ Ramin Kamfar
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Ramin Kamfar
Chairman and CEO
cc: Dennis Connolly
Jim Neidhart
