2024-11-05 09:26:28 :
TGI Friday’s Inc. is in talks with potential buyers after it recently filed for bankruptcy, its attorneys revealed Monday. The well-known restaurant chain known for its casual dining experience is facing significant financial pressure, in part due to the loss of control of key assets that backed a $375 million bond issued in 2017, Bloomberg reported.
The company filed for bankruptcy in Texas on Saturday and confirmed interest from multiple parties in acquiring some or all of its assets. However, the identities of these potential buyers were not disclosed during the initial court hearing. Corporate lawyer Chris Dickerson said TGI Friday was “very distant” from one particular bidder. The restaurant chain hopes the party will agree to act as a “stalking horse” bidder, a strategic move that would set a minimum purchase price for TGI Friday’s assets and pave the way for other potential bids in the Chapter 11 auction.
During Monday’s court discussion, focus turned to TGI’s Friday 2017 bond issuance, which was structured as a “whole business securitization.” This financing method involves backing bonds with the chain’s brand, licensing agreements, future franchise deals and franchise revenue. However, in September, TGI Friday lost control of these major revenue streams, which are now managed by FTI Consulting Inc. Receiving restaurant royalties has significantly impacted TGI’s revenue on Friday, the company said in recent court filings.
The whole-business securitization approach is increasingly popular among franchise chains because of its cost-effectiveness in financing, but has rarely been tested in bankruptcy cases. Under this structure, a special corporate entity would be set up in connection with the bond sale to secure those assets. However, those entities were not included in TGI’s Chapter 11 filing Friday.
During the hearing, FTI attorney Alexander Woolverton challenged some points in TGI’s bankruptcy filing on Friday, claiming the securitization entity “does not buy into the restaurant chain’s assertions.” Wolverton claimed TGI’s filing Friday was incomplete and suggested more details may emerge in upcoming litigation.
court approval
TGI Friday’s also received court approval to continue paying wages and covering other ongoing expenses while it reorganizes under Chapter 11 protection. Despite these operating subsidies, the chain has closed some stores and reported a 15% drop in U.S. sales last year. Part of this decline is due to rising costs and a shift in consumer behavior toward faster, limited-service dining options.
The case was filed in the U.S. Bankruptcy Court for the Northern District of Texas on behalf of TGI Friday’s Inc., No. 24-80069.
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