💥Market Dysfunction?💥
Hooters Files for Bankruptcy + an FMI Aerostructures Update
Let’s start this week with some feedback we received after Sunday’s paying-subscribers’-only edition — an edition that featured a macro-oriented opening that wasn’t behind the paywall. Everyone can revisit it here if so inclined:
A long-time reader whom we respect and often agree with wrote us the following:
Ok you fear mongering m’fers …I couldn’t get past this week’s opening monologue from you before you p**sed me off. I’m fine that we (may) have opposite political views; I’m really ok with your punditry and you using all the SCARY, ‘it’s the end of the world as we know it”, language, and stats to make your points; But,
I AM NOT HAPPY that your narrative is so one sided, focused on the effect of tariffs (after all of SIX (6) whole days since they were implemented) and based upon the “market” losses & stats most likely manipulated by all your buddies at Blackrock, JPM, Credit Suisse, and KKR, etc. (Mom & Dad shareholders, if all combined, couldn’t move the markets like that). Tariffs and their effect on the market are too convenient an excuse! But then again, isn’t that the narrative you wanted to subtly push…Orange Man and his policies: Woe is me, I’ll never be able to retire, I’m going to be eating beans for the rest of my life.
TOTAL BULLSHIT!
What about noting that some countries are already considering looking at relief from their tariffs on the U.S.? And, what about the “Oh my God” moment when the U.A.W. and its members (one of the most democratic stalwarts since time began) endorsed the Administration’s efforts to restore jobs to this country? What about mentioning the economy our former President left us. What about the economic impact of illegal immigration? And, yada, yada, yada.
Your opening was journalistically jingoistic and lopsided. You just your credibility and you should be ashamed of yourselves. Please (i) take a valium; (ii) calm the f**k down; and (iii) apologize to your readers for your over-hyped rhetoric with ZERO opposite facts or point(s) of view.
Once we got past the distressing logical inconsistency of censoring the word “p**sed” before letting “BULLSHIT” rip in all caps, we took some valium, calmed the f*ck down (good advice!) and … concluded …
… we did absolutely nothing wrong.
We did literally and exactly what the author said: we “…focused on the effect of tariffs (after all of SIX (6) whole days since they were implemented) … based upon the ‘market’ losses & stats…” because that is what we had before us. Nearly EVERY aspect of the market vomited all over the tariff news — the equity market (down big!), cap markets (widened credit spreads and new financings pulled!), the energy market (recession-sniffing oil prices!), BTC (risk off as The Crypto Fear & Greed Index entered “extreme fear” territory!), even gold (the “safe haven” dropped ~10% below 3000?!). Sure, we could have included a quote from someone like Elon Musk’s fave Peter Navarro hyping up the plans of President Trump to counter-balance our passing reference to Professor Siegel’s criticism of the administration’s policy, but that doesn’t change the macroeconomic realities at the time of writing.
Will the realities remain this way? Or will President Trump work the “art of the deal” and usher in a new era of American prosperity based on some notion of fairer global trade? We have no frikken clue.
Would we like an era of unfettered American prosperity? Of course we would! We’re Americans!! And if that comes to pass, we’ll address it. And celebrate it. But right now it’s completely speculative. What wasn’t speculative? The actual market reaction.
Things haven’t improved since Sunday’s publication.
Take Monday for instance. To recount how phenomenally 🍌🍌🍌 Monday was, here is
in his (apologies for the long block quote):This has been the most raucous week on Wall Street since the Covid panic from five years ago. President Trump’s tariff policies have spooked investors all over the world. In two days last week, Thursday and Friday, the S&P 500 lost a combined 10.5%. If that loss had happened in one day instead of two, it would rank as the fourth worst loss of all time.
On Monday, the stock market had an especially volatile morning. In just eight minutes, the S&P 500 rallied 5.66%. It then promptly lost 4.37% over the next seven minutes. We’re talking about several trillion dollars magically appearing and disappearing during less time than a lunchbreak.
What happened? Well, that’s a good question. It appears that Kevin Hassett, the Director of the National Economic Council, was being interview on Fox News. During the interview he was asked if the president was considering a 90-day pause for his tariff policies. Hassett clearly gave a non-committal answer (“the president is going to decide what the president is going to decide.”)
Somehow someone on Twitter took that for a yes and tweeted it out. That was from a small account (less than 1,000 followers), but soon a much larger account known as “Walter Bloomberg” reposted it, and suddenly, this was taken as serious news on Wall Street.
I should add that Walter Bloomberg is not connected with Bloomberg, the financial news service. His tweet came out at 10:11 am and by 10:12 am, CNN reported that cheers erupted on the floor of the NYSE. I guess that’s a good barometer of how unpopular the tariffs are on Wall Street.
At CNBC, the anchors were completely baffled by the market’s surge and by 10:15 am, they were reporting on the news. Soon Reuters was referencing CNBC but they were only going on what Twitter was saying. Soon people were referencing people who were referencing people who were just making things up.
He continued:
The White House denied the reports and Walter Bloomberg deleted his tweet, but the damage was already done. This is a good reminder than Wall Street is a place where rumors and fake news can lead to very real panics. Financial markets are made up of normal people and they can be as volatile as anybody, if not more so, especially in the short run. It took some time yesterday for traders to realize they had been duped.
Between yesterday’s high and low, the Dow swung by nearly 2,600 points. Trading volume on Monday reached 29 billion shares which is an all-time record. The previous record was 26.4 billion shares which came on Friday.
The equity market made one of the most dramatic short term moves in history.
As we write this — mere minutes before publication on Wednesday, April 9, 2025 — Dow futures are down more than 800 points as more tariffs have gone into effect and China responded with retaliatory tariffs of 84% on US goods. Walmart Inc. ($WMT) pulled its quarterly operating income forecast and Delta Airlines ($DAL) pulled its ‘25 guidance. Bill Ackman wrote an hour ago, “Our stock market is down. Bond yields are up and the dollar is declining. These are not the markers of successful policy.” Ackman was an unabashed supporter of President Trump in the ‘24 election.
The VIX closed at a five-year high on Tuesday:
At the time of this writing, it’s up another 10% to nearly 58.
The VIX is literally otherwise known as the “Fear Index.”
But WE’RE fear mongers?!? C’mon. We’re just calling it like we see it … in the markets.
Look, we appreciate any and all feedback but not everything is political.*
*The comment section below is open if anyone wants to chime in.
🦉New Chapter 11 Bankruptcy Filing - Hooters of America LLC🦉
Speaking of something real and spectacular …
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%), and $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 (gotta respect the K&E alumni network!). Here is the corporate org chart:
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.
⚡Update 2: Dynamic Aerostructures LLC⚡
At least something will have a soft landing.
We recently updated y’all on Dynamic Aerostructures LLC here…
… after initiating coverage here:
To briefly refresh your recollection, the SoCal-based bada$$ manufacturer of aerospace sh*t filed for bankruptcy back in late February in the District of Delaware (Judge Silverstein), almost immediately precipitating a dogfight between proposed stalking horse bidder Avem Partners (“Avem”)(proposing $16mm in cash plus the assumption of liabilities) and competing bidder TRM Equity (“TRM”).
Subsequent to the first day hearing, Avem was feeling the heat from TRM and so it went all Mach 10 after pre-petition lender BMO Harris Bank NA (“BMO”)(owed $54mm), which, reminder, “…wanted to f*ck off in the hardest and fastest way imaginable” and took the paper off of BMO’s hands with an intent to turn around and credit bid.
TRM — realizing there are no points for second place in a chapter 11 asset sale — huffed and puffed and filed a bunch of whiny sh*t on the docket (i) seeking clarification of Avem’s intentions with respect to the prepetition paper and a potential credit bid and (ii) threatening to back out of the bidding process. Avem subsequently confirmed it would, in fact, credit bid, and basically told TRM to get G-loc’d. We noted TRM’s concern: the credit bid very well could have the effect of chilling alternative bids.
So did it?
Does Slider stink?
Yes, yes he does.
TRM took a hike without a bid. And no one else came forward either. On April 2, 2025, the debtors filed a notice of successful bidder, indicating that the stalking horse bid of $16mm was the successful bid and canceling the potential auction. After the debtors filed a sale order under certification of counsel, Judge Silverstein approved the sale on April 7, 2025.
Congrats to Avem for emerging from this brawl as the winner. 🎉
📚Resources📚
We have compiled a list of a$$-kicking resources on the topics of restructuring, tech, finance, investing, and disruption. 💥You can find it here💥.
📤 Notice📤
David Feldman (Global Co-Head of Restructuring & Insolvency) joined Clifford Chance from Gibson Dunn.
Kimberly Pageau (Counsel) joined Porzio Bromberg & Newman PC from Goodwin.
Just hoping the long-time reader gets to chime in after the market reaction today... And before whetever tomorrow brings!
sometimes the market acts dumb as hell for many months.
other times, it rapidly senses a broader truth regarding strategy and longterm risks, despite the reliability of the source :
"Asked on Wednesday how he would decide on any further exemptions, Mr. Trump said: “Instinctively, more than anything else. I mean, you almost can’t take a pencil to paper. It’s really more of an instinct, I think, than anything else.”
NYT 9april2025