Fatburger Owner Is the Latest Casual-Dining Bankruptcy

(Bloomberg) -- FAT Brands Inc., the proprietor of edifice chains Fatburger, Johnny Rockets and Twin Peaks, filed for bankruptcy, adding to a drawstring of casual-dining brands that person sought tribunal extortion from creditors.

The Beverly Hills-based institution filed for Chapter 11 bankruptcy successful Texas connected Monday, tribunal documents show. The institution has astir $1.45 cardinal of funded indebtedness obligations outstanding, according to a tribunal filing from FAT Brands’ main restructuring serviceman dated Jan. 27.

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The measurement came aft FAT Brands didn’t marque involvement payments owed successful October connected immoderate of its $1.2 cardinal successful whole-business securitization debt. Creditors past called for a afloat and contiguous repayment of that full amount, saying the nonaccomplishment to wage constituted a default. According to the declaration, a radical of creditors indicated they would contented a announcement of foreclosure connected the collateral absent a Chapter 11 filing.

With nary restructuring program successful place, FAT Brands plans to trust connected currency collateral and aboriginal currency receipts to money the archetypal signifier of the Chapter 11, with the fund lone contemplating 4 weeks of runway, the filing said. FAT Brands volition proceed to question caller financing, fixed it cannot run successful Chapter 11 beyond this constituent without further liquidity.

The illness follows respective different bankruptcies successful the casual-dining manufacture successful caller years, including Hooters, Red Lobster and TGI Friday’s. Many, similar Fat Brands, were loaded up with full concern securitization debt, a merchandise that uses Wall Street fiscal engineering to little borrowing costs for franchise-heavy businesses.

FAT Brands received absorption fees connected these securitization vehicles, but they mostly person not covered the operating costs of the businesses, according to the tribunal filing. Meanwhile, indebtedness work connected the securitizations became “increasingly unsustainable” fixed ratcheting penalties, portion the steadfast besides grappled with inflation, ineligible fees stemming from governmental litigations and manufacture headwinds.

The institution yet turned to different financing methods, including non-securitization debt, communal and preferred equity, but that wasn’t capable to money the vehicles and plug liquidity gaps.

Generally, FAT Brands’ securitzation notes supply that absorption fees are paid up of indebtedness work obligations. Only aft that tin residual amounts beryllium utilized to fulfill different operating expenses oregon distributed to managers. However, without different sources of financing, the institution had “no choice” but to usage definite collections from the whole-business securitizations to money their operations, the main restructuring serviceman wrote.