🦉New Chapter 11 Bankruptcy Filing - Hooters of America LLC🦉
Restaurant chain's assets couldn't keep them afloat.
On March 31, 2025, Hooters of America, LLC and 29 affiliated debtors (collectively, the “debtors”) filed chapter 11 bankruptcy cases in the Northern District of Texas (Judge Everett). In the off-chance you were not already acquainted with the debtors’ “globally recognized brand,” they own and operate 151 restaurants that dish out “world-class chicken wings, beer, and sports entertainment,” along with another 154 franchised locations. But don’t let that impressive size fool you; the debtors’ footprint, as well as its storied 42-year history, are a testament to the superior dining experience their servers, attired in pristine, tailored uniforms, deliver.
Beyond ensuring the masses are well-fed and sufficiently lubricated, the debtors are respected social citizens that (i) champion worthy causes like gender equality through a staggering 70% female workforce* and fitness through gym membership discounts for its 5,957 employees and (ii) make substantial contributions to their communities, including “raising awareness and funds for breast cancer research,” assembling “care packages for the Armed Forces to send overseas,” helping “employees who are facing financial hardship immediately after a natural disaster,” raising “money for important local and national charities like the Make-A-Wish Foundation, U.S.O., Special Olympics, American Diabetes Association, Juvenile Diabetes Foundation, and the Muscular Dystrophy Association,” and, last but certainly not least, keeping our wildlife safe by performing beach clean-ups.**
But, unfortunately, even good people fall on hard times, and despite generating $22.6mm in revenue from franchisees and $358.9mm from owned locations – $254.4mm from food (71%); $101.4mm from adult beverages (28%); $3.1mm from merch (1%) – in FY24, their stacked overhead has simply exceeded their means in recent years.
In addition to the above, the debtors pay ~$4.2mm per year on account of “purported” legacy royalty obligations,*** owe ~$26.3mm to vendors, suppliers, and other trade counterparties, and – this isn’t in the first day declaration of CRO and Accordion Partners, LLC (“Accordion”) senior MD Keith Maib – have been the victims of bad actors, which required them to pay $250k in October ‘24 to settle, without any admission of wrongdoing, a lawsuit.
Explaining their financial woes to readers, the debtors understandably note “inflationary pressures,” the “macroeconomic environment,” and a “capital structure overhang” as the primary forces necessitating refuge in bankruptcy court, and – while also undiscussed in Mr. Maib’s declaration – other (seemingly self-centered) “me-too” movements have likely had a negative impact on the debtors' bottom line. Making their troubles worse yet, the debtors’ core audience – young, fun-loving men – have been adversely impacted by the widespread adoption of high-speed Internet, which allows them to use their phones in the privacy of their own homes and vigorously … order wings and beer right to their doorstep via DoorDash ($DASH). Quite frankly, with how often we hear they’re whipping those damn things out (the phones, we mean), the boys may very well break ‘em.
To get in front of their balance sheet, these effectively-benefit-corporation debtors engaged Accordion and Ropes & Gray LLP (Ryan Preston Dahl, Chris Dickerson, Rahmon Brown, Michael Wheat) in June ‘24 and, a month later and in a quite novel approach, installed “an experienced, independent fiduciary” at parentco debtor Hawk Parent LLC (“Hawk Parent”) by the name of Adam Paul, a partner managing director at Kirkland & Ellis LLP Mayer Brown LLP Gordian Group, LLC.
In October ‘24, SOLIC Capital, LLC (George Koutsonicolis) donned the debtors’ celebrated attire, which we understand features orange shorts to enhance public awareness of gun violence, and joined the team. And over the next several months, the debtors and their advisors analyzed various “strategic alternatives” to get the beloved business back on level footing. And to their credit, the debtors’ stakeholders, including the lenders under the Manager Advance Credit Agreement and the Term Loan Credit Agreement and “a substantial majority” of A&R Base Indenture noteholders, were there to lift up the business and provide much-needed support to employees too, ultimately agreeing to a restructuring support agreement (the “RSA”) that contemplates the following:
📍A “non-binding commitment” for the sale of certain debtor-owned stores to current-franchisees-and-RSA-parties Hooters, Inc. (owned by the debtors’ founders) and Hoot Owl Restaurants, LLC (collectively, the “buyers”), to be funneled through a chapter 11 plan. Together the buyers own and operate over 30% of the US-franchised Hooters locations, including 14 of the 30 highest volume restaurants, so it’s safe to say these guys are all in on Hooters and the smiles they bring to faces across the globe.
📍A transition from a hybrid franchise-and-debtor-owned business model to a pure franchise model, which the debtors believe will augment their business.
📍A $40mm DIP term loan, composed of $35mm of new money ($5mm interim) and a final order $5mm roll-up of the bridging incremental loan ☝️, lent by Celtic Master Fund LP, XYQ Cayman Ltd., FFI Fund Ltd., FYI Ltd., and Olifant Fund, Ltd. The DIP also provides for an additional, but uncommitted, $15mm accordion facility. It carries a cash-pay prime (4.75% floor) + 3% rate and doesn’t have any fees other than payment of DIP agent costs and expenses.
📍A prearranged plan and corresponding disclosure statement that will convert existing debt into new notes and equity in the go-forward business, to be filed by April 10, 2025, along with the following milestones:
The court held the first-day hearing on April 2, 2025, at which it was all too delighted to grant all requested relief, and scheduled the second day for April 30, 2025. In the interim, we hope you drive, bike, or even motorboat over to your local Hooters, enjoy some world-class dining, and support this noble enterprise and its 100% women-led waitstaff.
The debtors are represented by Ropes & Gray LLP (Ryan Preston Dahl, Chris Dickerson, Rahmon Brown, Michael Wheat) and Foley & Lardner LLP (Holly O’Neil, Stephen Jones, Zachary Zahn) as legal counsel, Accordion Partners, LLC (Keith Maib) as financial advisor and CRO, and SOLIC Capital, LLC (George Koutsonicolis) as investment banker. Adam Paul is Hawk Parent’s independent manager and is the sole member of its special committee. An hoc group of A&R noteholders is represented by White & Case LLP (Brian Pfeiffer, Amanda Parra Criste) and Gray Reed (Jason Brookner, Lydia Webb). The DIP lenders, which are also term loan and manager advance lenders, are represented by Sidley Austin LLP (Sam Newman, Genevieve Weiner, Juliana Hoffman). Hooters, Inc. and Hoot Owl Restaurants, LLC are represented by Morrison & Foerster LLP (Benjamin Butterfield, Sean Daly) and McDermott Will & Emery LLP (Marcus Helt).
*Although we appreciate their gender-equality efforts, we’d be remiss not to note the debtors’ opportunity to improve at the C-suite level, 83% of which is, disappointingly, male.
**Read more about the debtors’ civic efforts here, here, and here.
***The debtors intend to challenge the validity of the legacy royalty obligations.
Company Professionals:
Legal: Ropes & Gray LLP (Ryan Preston Dahl, Chris Dickerson, Rahmon Brown, Michael Wheat) and Foley & Lardner LLP (Holly O’Neil, Stephen Jones, Zachary Zahn)
Financial Advisor and CRO: Accordion Partners, LLC (Keith Maib)
Investment Banker: SOLIC Capital, LLC (George Koutsonicolis)
Independent Manager: Adam Paul
Claims Agent: Kroll (Click here for free docket access)
Other Parties in Interest:
Ad Hoc Group of Securitization Noteholders
Legal: White & Case LLP (Brian Pfeiffer, Amanda Parra Criste) and Gray Reed (Jason Brookner, Lydia Webb)
Hooters, Inc. and Hoot Owl Restaurants, LLC
Morrison & Foerster LLP (Benjamin Butterfield, Sean Daly) and McDermott Will & Emery LLP (Marcus Helt)
The Proposed DIP Lenders, Term Loan Lenders, and Manager Advance Lenders: Celtic Master Fund LP, XYQ Cayman Ltd., FFI Fund Ltd., FYI Ltd., and Olifant Fund, Ltd.
Legal: Sidley Austin LLP (Sam Newman, Genevieve Weiner, Juliana Hoffman)