🌮New Chapter 11 Bankruptcy Filing - OTB Holding LLC🌮
Casual restaurant chain files to sell its assets in bankruptcy after shedding 40 locations immediately before filing.
On March 4, 2025, Atlanta-based OTB Holdings LLC (“OTB”) and six affiliates (collectively, the “debtors”) filed chapter 11 bankruptcy cases in the Northern District of Georgia (Judge Sigler) because nothing will lube up the bankruptcy system for the inevitable Hooters monstrosity like an “award-winning margarita” at your favorite local casual Tex-Mex food concept, On The Border Mexican Grill & Cantina — the “OTB” in this equation, if you’re too hungover from “award-winning” margaritas to figure that out on your own.
Frankly, we wish we were drinking right now: first, because that would justify the preceding run-on sentence and, second, because the history of this company is a neck-snapping rollercoaster. In short, it was founded in 1982; it sold 12 years later to Brinker International Inc. ($EAT). Sixteen years later EAT sold OTB — which at that point had grown to 160 “cantinas” — to Golden Gate Capital, which, four years later, flipped this hot enchilada to Argonne Capital Group (“Argonne”). Argonne has owned this thing ever since; it probably wishes it didn’t. We love this bit because it’s such a *chef’s kiss* sequence of sentences:
“On The Border leverages its unique, authentic brand to differentiate itself from others in the casual dining sector. As of the Petition Date, the Debtors continue to operate sixty (60) restaurant locations across eighteen (18) states.”C’mon, y’all. This has to be some sort of violation. You can’t be bragging about your restaurant chain’s uniqueness and authenticity only to immediately follow that up with “as of the petition date” and casually slip in that the enterprise shrank by ~100 locations, LOLOL. You know what’s not unique? A slimmed-down casual restaurant chain in bankruptcy court. That’s right: there’s … literally … nothing … unique … about … that. For a recent pair of examples, see, e.g., Red Lobster and TGI Friday’s.
As if this story wasn’t droll enough, the reasons for the debtors’ bankruptcy are also very … well … whatever the opposite is of the word “unique.” Unoriginal? Yeah, sure, we’ll go with that: unoriginal. Inflation — particularly in the form of labor costs — impacted menu prices, which outpaced the rising cost of groceries and so people stayed the eff home. Or at least they sure as sh*t didn’t go to OTB. The rising minimum wage rate in several of the states within which the debtors operate also impacted the debtors, compressing margins and affecting the debtors’ ability to recruit and maintain their workforce. Damn you Bernie Sanders!
With the wage inflation box checked, what other wholly hackneyed elements are at play here? Well, pretend this is The Family Feud and if you hit that buzzer and scream out “burdensome leases,” congratulations, the “survey says” you’re dead on and you just earned yourself an epically gratuitous a$$-groping and herpes infusion courtesy of Richard Dawson (may he RIP). Seriously, folks, what the f*ck was this sh*t ⬇️?
Hot damn the 80s were horny AF. How many margaritas was that guy 👆 pounding each night. OTB founded in 1982. Dawson terrorizing an allegedly family friendly show throughout the first half of the decade. Causation or correlation? Inquiring minds want to know.
We digress (and we lied, at this point we’re DEFINITELY drinking … in case you couldn’t tell … nothing like a good canned margarita at home … oh, oops!, sorry OTB!!).
Let’s get to the trifecta. With unnecessary leases and expenses increasing and margins decreasing, the debtors started to experience severe liquidity issues in the months preceding the filing. Consequently, the debtors did what one does in that situation. Yup, screw over vendors! Here’s Alvarez & Marsal LLC’s Jonathan Tibus, the debtors’ CRO in a first day declaration:
“Due the Company’s rapid loss of liquidity in the months preceding the filing, the Company was forced to quickly institute holds on vendor payments and rent payments to maintain cash. Vendors and landlords unsurprisingly began to cut off service, withhold goods, repossess leased premises or exercise set-off rights when the Company began to hold vendor and rent payments. This resulted in the Company losing stores, additional operational challenges, and a severe liquidity crisis.”Wait. Tibus, Tibus. Why does that name sound familiar? Oh sh*t!! Homie made one of our earliest Notices of Appearance back in ‘18. The main subject? Distressed restaurants, lol! Like we said: literally … nothing … unique … about … this. At this point we’re guessing Jonny Boy (Tibus, not our Johnny) is running this thing on auto-pilot.
Which begs the question: running what thing, exactly? Survey says … asset sale case!!
Take it away Jonny:
“After thoroughly exploring all options available to the Debtors to raise capital or commence an alternative sale or recapitalization transaction, and in light of the added challenges facing the Debtors, including, a dire lack of liquidity, declining revenue and labor shortages, the managers and managing members of the Debtors (collectively, the “Managers”), as applicable, determined that commencement of the Chapter 11 Cases to implement a strategic asset sales strategy (the “Sale Strategy”) under section 363 of the Bankruptcy Code is in the best interest of all stakeholders.”Enter Hilco Corporate Finance LLC (“Hilco”) which, holy hell, sure wants to earn its fee. The fine folks there reached out to a staggering 273 strategic and financial potential bidders to serve as a stalking horse purchaser in these cases. While Hilco and the debtors were unable to secure said stalking horse purchaser in advance of the filing, the debtors did obtain slightly over $4mm in priming bridge financing in the lead-up to the filing from OTB Lender LLC (an affiliate of Pappas Restaurants Inc.), which will also serve as the DIP lender and likely stalking horse (if negotiations go well). Due to the bridge financing, the debtors’ capital structure looks like this:
The proposed DIP totals $14mm, comprised of (i) $11.5mm upon entry of an interim DIP order (of which $7.5mm is new money and the remainder a roll-up of the bridge financing amount) and (ii) $2.5mm in additional new money upon entry of a final order. There’s a 0.50% PIK DIP facility fee and the facility carries a 12% interest rate (PIK). The maturity is the earliest of acceleration or May 30, 2025. So, yes, the debtors will be operating quickly in bankruptcy — though not as lightning fast as some other cases we’ve seen lately.
We wish Hilco and the debtors the best of luck in drumming up a competitive bidding process.
The debtors are represented by King & Spalding LLP (Jeffrey Dutson, Brooke Bean, Alice Kyung Won Song) as legal counsel and the aforementioned Alvarez & Marsal LLC (Jonathan Tibus) and Hilco (Teri Stratton) as financial advisor (and CRO) and investment banker, respectively. OTB Lender LLC is represented by Porter Hedges LLP (Joshua Wolfshohl, Eric English, M. Shane Johnson) and Parker Hudson Rainer & Dobbs LLP (Harris Winsberg, Sameer Kapoor) while prepetition RCF lender, CrossFirst Bank, is represented by Barnes & Thornburg LLP (Lisa Wolgast, Talia Wagner).
Company Professionals:
Legal: King & Spalding LLP (Jeffrey Dutson, Brooke Bean, Alice Kyung Won Song)
Financial Advisor/CRO: Alvarez & Marsal LLC (Jonathan Tibus)
Investment Banker: Hilco Corporate Finance LLC (Teri Stratton)
Claims Agent: Verita (Click here for free docket access)
Other Parties in Interest:
Senior Secured Noteholder & DIP Lender: OTB Lender LLC (an affiliate of Pappas Restaurants Inc.)
Legal: Porter Hedges LLP (Joshua Wolfshohl, Eric English, M. Shane Johnson) and Parker Hudson Rainer & Dobbs LLP (Harris Winsberg, Sameer Kapoor)
Pre-petition RCF Lender: CrossFirst Bank
Legal: Barnes & Thornburg LLP (Lisa Wolgast, Talia Wagner)
Secured Food Vendor: U.S. Foods