FAT Brands Inc., a company that develops, markets, acquires, and manages restaurant concepts around the world with eighteen brands and approximately 2,200 locations, filed an emergency motion seeking court approval for a two-part debtor-in-possession financing facility totaling $76.9 million in new money. The financing is part of a Chapter 11 restructuring process that the motion states is expected to culminate in the sale of substantially all of the company's assets.
The motion, filed March 18, 2026, in the United States Bankruptcy Court for the Southern District of Texas, Houston Division, under Case No. 26-90126 (ARP), follows the company's voluntary Chapter 11 filing on January 26, 2026. The financing would be provided by certain members of an ad hoc group of the company's existing prepetition noteholders, which holds approximately 78.8% of outstanding prepetition notes, after a marketing process that solicited proposals from 31 potential lenders produced no third-party term sheets.
Company Background and Business Operations
FAT Brands Inc. and its subsidiary, Twin Hospitality Group Inc., together comprise a multi-brand restaurant company that develops, markets, acquires, and manages quick-service, fast casual, casual dining, and polished casual dining restaurant concepts around the world. As of the petition date, the company had approximately 7,500 direct full-time and part-time employees, eighteen restaurant brands, and approximately 2,200 locations open or under construction, including more than 150 company-owned restaurants and more than 1,900 franchised locations. The motion states the company is one of the largest restaurant companies in the United States by number of locations.
Events Leading to the DIP Financing Motion
The debtors entered their Chapter 11 cases in what the motion describes as an extremely fragile liquidity position and with no committed debtor-in-possession financing. Since the petition date, the debtors have sustained operations through the use of cash collateral. The motion states that while the debtors continue to generate cash revenues from operations, the significant administrative costs of the Chapter 11 cases cannot be funded solely from cash on hand, and that access to incremental liquidity through DIP financing is required.
An official committee of unsecured creditors was appointed by the Office of the United States Trustee for the Southern District of Texas on February 6, 2026.
Governance Agreement
Prior to the filing of the DIP motion, the debtors participated in a mediation with the WBS Ad Hoc Group and the official committee of unsecured creditors. On March 11, 2026, the mediator—a sitting United States bankruptcy judge—delivered a final proposal to resolve disputes over the debtors' governance structure, and the mediation parties reached a settlement reflected in the Governance Agreement.
The resulting Governance Agreement, filed concurrently with the DIP motion on an emergency basis, restructured management authority at the debtor entities. Under its terms: (a) the DIP lenders will pay $5 million to the FBG Manager in installments, which amount will be paid to the chief executive officer on the terms set forth in the Governance Agreement; (b) sole and exclusive authority to manage the affairs of the debtors will vest in the Special Committee; (c) the chief executive officer will take a temporary leave of absence until the later of the closing of a sale of the debtors' assets or consummation of a confirmed chapter 11 plan; (d) the employment of the chief executive officer's family members who are employed by the debtors will be terminated; and (e) the existing members (other than the Special Committee directors) of the DIP Loan Parties' boards of directors will resign. The motion states the Governance Agreement was a precondition to the DIP Facility.
Structure of the DIP Financing Facility
The proposed DIP Facility consists of two parallel components:
FBG DIP Facility: FAT Brands Royalty I, LLC, FAT Brands Fazoli's Native I, LLC, and FAT Brands GFG Royalty I, LLC serve as borrowers, with FAT Brands Inc. and each wholly-owned domestic subsidiary acting as guarantors. The facility provides up to $46.0 million in new money term loans, structured across three draws: an initial draw of $29.0 million available upon entry of the proposed interim order; a second draw of $1.0 million available upon entry of the final order and bidding procedures order; and a third draw of up to $16.0 million available at the bid deadline if available cash falls below $5.0 million in the aggregate across all DIP Loan Parties. Each dollar of new money drawn triggers a 3:1 roll-up of existing prepetition Class A-2 note obligations held by the DIP lenders, resulting in up to $138.0 million in rolled-up prepetition debt converting to DIP loans.
Twin DIP Facility: Twin Hospitality I, LLC serves as borrower, with FAT Brands Inc., Twin Hospitality Group Inc., and all wholly-owned domestic subsidiaries providing guarantees. This facility provides up to $30.9 million in new money, structured across three draws: $19.0 million at interim order entry; $1.0 million at final order entry; and up to $10.9 million at the bid deadline subject to the same liquidity threshold. The 3:1 roll-up mechanism applies to existing Twin prepetition notes (Class A-2-I and Class A-2-II), converting up to $92.7 million of prepetition obligations into DIP loans.
In both facilities, UMB Bank, N.A. serves as administrative and collateral agent. The combined facilities provide up to $76.9 million in new money and approximately $307.6 million in total principal when rolled-up prepetition debt is included. All DIP loans bear interest at 12.00% per annum, increasing to 14.00% per annum upon an event of default. The DIP loans mature on May 8, 2026, subject to earlier maturity upon specified termination events.
Marketing Process and Lender Selection
Prior to the petition date, the debtors, with the assistance of their investment banker, GLC Advisors & Co., LLC, solicited DIP financing proposals from 31 potential lenders, including both third parties and existing stakeholders. No third party or other prepetition creditor submitted a term sheet to provide a DIP financing proposal to the DIP Loan Parties as a whole. The motion further notes that the existing prepetition noteholders were unwilling to permit a third party to prime their prepetition liens, which would have required a contested priming proceeding. The debtors concluded that the terms offered by the WBS Ad Hoc Group represent the best available financing option. The DIP Facility is fully backstopped by certain members of the WBS Ad Hoc Group.
Sale Process and Case Milestones
The DIP Facility is structured to support a sale of substantially all of the debtors' assets under Section 363 of the Bankruptcy Code, which may be consummated through a series of sales. The financing agreement contains binding case milestones. Failure to meet milestones constitutes a termination event and may trigger acceleration of all outstanding amounts. The agreed timeline is as follows:
| Deadline | Milestone |
|---|---|
| March 19, 2026 | Bankruptcy Court enters the Proposed Interim Order |
| April 3, 2026 | Bankruptcy Court enters the Bidding Procedures Order approving sale procedures, with a bid deadline of no later than April 24, 2026 |
| April 10, 2026 | Bankruptcy Court enters the Proposed Final Order; DIP loans mature if Final Order is not entered by this date |
| April 24, 2026 | Bid deadline for the sale of substantially all of the DIP Borrowers' assets |
| April 28, 2026 | Auction for the sale of substantially all of the DIP Borrowers' assets |
| May 1, 2026 | Bankruptcy Court holds hearing to approve successful bid(s) and enters the Sale Order |
| May 4, 2026 | Consummation of the sale(s), subject to extension for applicable regulatory and HSR approvals |
| May 8, 2026 | DIP Maturity Date (unless earlier terminated) |
Adequate Protection
As adequate protection for the interests of the prepetition secured parties in the prepetition collateral, including cash collateral, from and after the petition date, the prepetition secured parties are to receive: (a) replacement liens on all DIP collateral to the extent of any diminution in value of the prepetition secured parties' interests; (b) superpriority administrative expense claims under Section 507(b) of the Bankruptcy Code; (c) payment of the reasonable and documented out-of-pocket fees, costs, and expenses of counsel to the prepetition trustees and counsel and financial advisor to the WBS Ad Hoc Group; and (d) ongoing access to budget and variance reporting and other information required to be delivered under the DIP documents.
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