FAT Brands Inc. (FAT) – RECENT ANNOUNCEMENTS CLEAR THE LEGAL AIR AS COMPANY WORKS TO RESTRUCTURE DEBT
Two announcements in the last week provide important relief to the negative cash flow trends that have been burdening FAT Brands in the last several years.
Excerpted from the press releases:
July 29, 2025 – “The United States Attorney for the Central District of California has filed a motion to dismiss all charges against Andrew “Andy” Wiederhorn, Rebecca Hershinger and William Amon.”
August 4, 2025 – “FAT Brands Inc. (FAT) announced today that it has entered a stipulation of settlement to resolve two stockholder derivative lawsuits pending in the State of Delaware on behalf o the Company against certain current and former directors and officers of the Company. The stockholder derivative claims were filed in June 2021 relating to the Company’s December 2020 merger with Fog Cutter Capital Group and March 2022 relating to the Company’s June 2022 capitalization. The settlement will resolve all claims asserted without any liability or wrongdoing attributed to them or the Company. Under the terms of the proposed settlement, the Company’s Board of Directors agreed to adopt and implement certain corporate governance modifications. In addition, the company’s insurers will play to the Company $10 million, from which fees and expenses of plaintiffs’ counsel will be deducted and Fog Cutter Holdings, LLC will contribute 200,000 shares of Twin Hospitality Group Inc. (TWNP) to the Company. The settlement is subject to approval of the Court, and non-objection by the United States.”
THE LEGAL BOTTOM LINE
The above two settlements appear to represent by far the lion’s share of the legal issues that have generated out of pocket legal expenses amounting to about $30M in just the last twelve months. The sharp reduction in ongoing legal expenditure is obviously very important.
BALANCE SHEET RESTRUCTURING
This area represents the other strategic financial priority for FAT Brands, and they are taking the necessary steps to strengthen the balance sheet and improve the debt service requirements. On the most recent Q2 conference call, Andy Wiederhorn indicated that “We continue to strengthen our balance sheet. In April, we amended our Fazoli’s securitization, resulting in improved terms that enhance our financial flexibility. The amended terms have extended both the call date and repayment date while relaxing certain covenants providing us with greater operational flexibility for Fazoli’s. The new agreement also permits the sale of corporate-owned stores to franchisees, allowing us to refranchise our 57 company-owned and operated Fazoli’s restaurants.”
On a broader scale, while reminding listeners that ““per the terms of our November 2024 new Twin Hospitality indenture, we have temporarily paused FAT’s common dividend and started to accrue the FAT’s Series B preferred dividend…..we are now turning our attention to the refinancing of our other three securitization silos, all of which have an anticipated repayment date of July of 2026. We have reduced SG&A by over $5 million a year based upon our 2024 run rate……We are focused on bringing FAT, which is a high-growth business into a cash flow positive position over the coming quarters, as well as further reducing leverage”.
IN SUPPORT OF BALANCE SHEET RESTRUCTURING – 7/31/25 – 8-K
“On or about July 9, 2025, FAT Brands Inc. entered into a confidentiality agreement with certain holders of notes issued by the Company’s special purpose, whole business securitization financing subsidiaries. The Confidentiality Agreement facilitated the Company’s ability to engage in discussions with the Holders regarding one or more potential transactions involving a refinancing, restructuring or similar transaction with the Holders.
Pursuant to the Confidentiality Agreement, the Company agreed to publicly disclose certain confidential information previously disclosed to the Holders by a specified date. The Cleansing Material attached as Exhibit 99.1 hereto was prepared as of an earlier date and is being furnished in satisfaction of the Company’s public disclosure obligations under the Confidentiality Agreement. The potential transaction described in the Cleansing Material was the Company’s initial proposal. An agreement has not yet been reached with the Holders and we expect negotiations to continue.”
CONCLUSION
The above material is largely self-explanatory. The benefit of the legal settlements is of major importance on several corporate levels. The major improvement in current cash flow from (1) reduced legal expenses (2) temporary suspension of dividends and (3) G&A savings, on top of portfolio “liquidity” efforts such as the Fazoli re-franchising should logically contribute to successful debt restructuring. This in turn, would lead to the “cash flow positive” objective that will benefit all stakeholders.
Roger Lipton