FAT Brands owes nearly $1.3 billion in securitized debt—and the bank said it’s due immediately.
The portfolio company reported in an 8-K filing November 21 that it’s considering restructuring through bankruptcy because it doesn’t have the “amounts on hand” to pay back the bank.
“Such acceleration or any subsequent foreclosure may materially and adversely affect the company’s business, financial condition and liquidity, and could cause the company and/or its subsidiaries to seek to reorganize through a bankruptcy proceeding,” the company said in the filing.
UMB Bank, which is an indenture trustee in this matter, sent notices of acceleration on behalf of investors to FAT Brands November 17, stating the outstanding principal amount is “immediately due and payable.” The securitization issuers are FAT Brands GFG Royalty I, FAT Brands Fazoli’s Native I, Twin Hospitality I and FAT Brands Royalty I.
At the time of the 8-K filing, the company said, “There has been no foreclosure on the collateral securing the accelerated notes, but the company cannot provide any assurance that will not occur.”
The company said in a statement to Franchise Times, "We are actively engaged in constructive negotiations with our bondholders to address the restructuring of our debt to strengthen FAT Brands’ balance sheet. Throughout these discussions, we remain focused on the day-to-day operations of the brands and the continued success of our portfolio and franchise partners.”
The company—which owns 18 restaurant brands, including Johnny Rockets, Fatburger and Fazoli’s—said it’s in discussions with the noteholders in regards to refinancing or restructuring to pay back the debt. While FAT Brands will continue that discussion, it reported that it can’t assure shareholders that anything will come of it.
FAT Brands in 2020 began a buying spree and in the process accumulated significant debt. It acquired nine restaurant chains over 18 months in five separate acquisitions for $917.5 million. It spun off one of those acquired brands, Twin Peaks, with an initial public offering in January in a move to deleverage its balance sheet.
FAT Brands CEO Andy Wiederhorn said during the company’s third quarter earnings call that it was moving forward with a plan to raise between $75 million and $100 million in equity at Twin Peaks “to pay down debt and fund new unit development.”
Wiederhorn returned as CEO of FAT Brands in September. He stepped down in May 2023 amid a federal investigation into the company and his family but stayed as the board chairman. Last year, the U.S. Securities and Exchange Commission charged him with a number of federal offenses, including misappropriating $27 million from the company for personal expenses. As part of a parallel investigation, he and others were criminally indicted by a federal grand jury in Los Angeles for wire fraud, tax evasion and other counts related to the alleged scheme.
The Department of Justice dropped its case in July this year. The SEC’s civil charges are still pending.
FAT’S share price today is down nearly 74 percent from a month ago, to 50 cents. It reached a peak of $6.84 a share at the end of January when it spun off Twin Hospitality Group, which includes Twin Peaks and Smokey Bones. Twin Hospitality Group’s share price is $2.15 today, down about 47 percent from a month ago.
Editor's note: A former version of this article stated that FAT Brands owes the money to UMB Bank. But UMB is an indenture trustee, not a lender, in this matter and is acting on behalf of investors.