Fat Brands submitted an objection in bankruptcy court on Monday to an emergency motion filed by a group of creditors seeking to temporarily suspend CEO Andrew Wiederhorn, according to court filings. The creditors argued that Fat’s sale of shares of Twin Hospitality to White Lion Capital for $3 million on Jan. 30 was not approved by the court.
The company, which owns Fatburger, Round Table Pizza and over a dozen restaurant brands, said the motion was a “personal attack” on the CEO.
Fat Brands admitted in its filing that processing the White Lion transaction without first obtaining court approval was a mistake. Fat explained the error by stating that it is new to the Chapter 11 process. Fat said it did not know that the transaction needed to be first approved by the court.
The restaurant company has since set aside the proceeds in a separate account until approved by the court. Fat’s advisors provided information on the transaction to the creditors, Office of the United States Trustee, mediator and additional stakeholders, and filed a motion seeking approval from the court.
“While the Ad Hoc Group has made no secret that it desires to oust the Debtors’ CEO — including by filing its Trustee Motion on the first day of the Chapter 11 Cases—the Issuance … does not warrant the extraordinary relief requested by the Ad Hoc Group, and the Court should deny the relief requested,” the objection states.
Fat stated that the group’s emergency motion is “personal — an attempt to shame the Debtor’s CEO without full process or the opportunity to present their side of the story.”
Fat’s motion said that the debtors and the ad hoc group of creditors are barely a week into mediation and that the company needs time to play out the mediation process to avoid “business disruption and duplication of efforts to maximize value,” and that the creditors’ emergency motion “distracts the Debtors from prioritizing stabilizing operations and securing necessary financing.”
On Tuesday, U.S. Trustee Kevin Epstein filed an objection to the emergency motion to suspend Wiederhorn. He said that the Chapter 11 process can only appoint a trustee — not suspend a CEO or other management — if it is proven that leadership can’t fulfill fiduciary responsibilities.
Fat Brands and Twin Hospitality filed for Chapter 11 bankruptcy protections in January after facing various litigation and pressure from lenders seeking repayment of over $1.2 billion in debt accrued in a flurry of restaurant acquisitions over the last few years.
