Dive Brief:
- Fat Brands’ creditors declared the restaurant company’s $1.3 billion in debt due in full, immediately, according to a filing with the Securities and Exchange Commission, pushing the company closer to bankruptcy.
- The creditors declaration covers debt owed by Fat and four of its subsidiaries. The company does not have the cash on hand needed to pay down the loans immediately, according to the filing.
- Further action by the lenders “may materially and adversely affect the [Fat Brands] business, financial condition and liquidity, and could cause [Fat Brands] and/or its subsidiaries to seek to reorganize through a bankruptcy proceeding,” the filing states.
Dive Insight:
The acceleration of the debt repayment comes after Fat defaulted on debt issued by five of its subsidiaries last month. Fat, according to the filing, has been in discussions with the lenders about refinancing or restructuring its debt burden.
The default was a result of factors including insufficient deposits in the collection accounts for the securitization notes at UMB Bank, National Association, which is Fat’s bank for the debt. Fat ended the most recent quarter with $2 million in cash and roughly $12 million in restricted cash, according to its 10-Q.
On the company’s most recent earnings call, Andrew Wiederhorn, Fat’s on-again, off-again CEO, said the company was looking to raise between $75 million and $100 million in equity at Twin Peaks, its publicly traded casual dining spinoff, to pay down debt owed to noteholders.
Fat Brands accrued significant debt through a lengthy spree of acquisitions that started in 2019. In 2023, Fat began pushing to spin off Twin Peaks through an IPO meant to deleverage its balance sheet. The next year, the company hired Jordan Chirico as an executive with responsibilities for refinancing debt, new debt issuance and reducing leverage.
The company, like many in the restaurant industry, had a difficult quarter with a 3.5% decline in same-store sales, according to its earnings release. On the earnings call, Wiederhorn said that decline was an improvement over previous quarters’ drops, “representing our strongest quarterly performance so far this year.”
Fat has continued to open new units across many of its brands, according to its most recent earnings release. That stands in contrast with TGI Fridays, which was subject to a manager termination event by its bondholders last year following a multi-year erosion of its U.S. store base.
