Franchise Group Inc. and its affiliated debtors have filed their Fourth Amended Joint Chapter 11 Plan, detailing a comprehensive restructuring strategy that includes both potential asset sales and debt-to-equity conversion mechanisms. The filing was made in the U.S. Bankruptcy Court for the District of Delaware (Case No. 24-12480).
The amended plan, filed by Willkie Farr & Gallagher LLP as counsel to the debtors, outlines a two-pronged approach: a plan equitization transaction for non-liquidating debtors and store-closing liquidation sales for American Freight operations. The plan also implements a settlement with the Official Committee of Unsecured Creditors that was reached on February 3, 2025.
Key elements of the restructuring include the conversion of DIP claims and first-lien debt into new equity, the establishment of litigation trusts, and the potential issuance of warrants representing up to 5% of reorganized equity. The plan contemplates a pro forma leverage cap of $600 million for the reorganized company.
The plan also provides for the creation of two separate litigation trusts: one for OpCo debtors and another for Freedom HoldCo debtors. These trusts will pursue various claims and causes of action that are not being released under the plan.
A significant feature of the plan is the committee settlement, which provides for $21 million in initial trust funding, minus professional fees incurred by committee professionals through the plan's effective date.
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Link: Fourth Amended Joint Chapter 11 Plan
Document length: 103 pages