Restaurant Chain's Reorganization Plan Wins Overwhelming Backing as Company Prepares to Exit Bankruptcy
Hooters of America LLC and its affiliated companies moved closer to exiting bankruptcy protection as the iconic restaurant chain filed a comprehensive legal memorandum on Friday supporting court confirmation of its reorganization plan, which has garnered overwhelming creditor support despite facing limited opposition.
The 70-page filing with the U.S. Bankruptcy Court for the Northern District of Texas seeks final approval of a restructuring plan that would reorganize more than $350 million in secured debt while preserving thousands of jobs and enabling the divestiture of 103 company-owned restaurants to a buyer group. All four classes of creditors entitled to vote on the plan have accepted it by the required majorities, according to court documents.
Broad Stakeholder Consensus Emerges
The plan's widespread acceptance represents a significant milestone for the Atlanta-based company, which operates 151 company-owned locations and oversees 154 franchised restaurants across 17 countries. Voting results show that Classes 2, 3, 4, and 8—comprising securitization noteholders, term loan lenders, and general unsecured creditors—all voted to accept the reorganization proposal.
"The widespread level of consensus reached in these Chapter 11 Cases is a testament to the tireless efforts of the Debtors, all of the Debtors' key stakeholders, and their respective professionals to provide significant recoveries to the Debtors' creditor constituencies," the company stated in its court filing.
The Official Committee of Unsecured Creditors, appointed in April, has also endorsed the plan following negotiation of a global settlement that addresses various disputed claims and establishes a litigation trust for pursuing certain causes of action.
Complex Financial Restructuring
Founded in 1983, Hooters has developed a complex capital structure involving securitized debt instruments that the reorganization plan seeks to address. The restructuring contemplates issuing new debt instruments while canceling existing obligations, with secured creditors receiving new securities and general unsecured creditors obtaining cash distributions and potential additional recoveries through the litigation trust.
Central to the plan is the "Buyer Group Arrangements," which involve transferring 103 company-owned restaurants to special purpose entities controlled by a buyer group. This transaction is designed to preserve restaurant operations and associated employment while providing liquidity to the bankruptcy estates.
Keith Maib, the company's Chief Restructuring Officer, has filed a supporting declaration arguing that the plan provides "the best return that can be achieved under the circumstances" while positioning the reorganized company for "future growth and success."
Limited Opposition Remains
Despite broad creditor support, the company faces objections from three parties. The U.S. Trustee has raised concerns about certain injunction provisions, though the company argues these issues have been largely resolved through plan modifications and confirmation order language.
More significantly, Lags Equipment LLC has filed extensive objections challenging fundamental aspects of the plan. Lags claims ownership rights or security interests in certain royalty revenues dating back to agreements from the early 1980s, arguing that the plan improperly treats these as estate property rather than recognizing Lags' alleged superior rights.
The dispute with Lags is the subject of ongoing adversary proceedings, with Hooters maintaining that it properly controls the contested royalty streams and is entitled to treat them as estate property for restructuring purposes.
Restaurant Industry Implications
The Hooters reorganization comes as the casual dining sector continues facing pressures from changing consumer preferences, increased competition, and operational challenges. The company's ability to achieve broad creditor consensus while preserving its restaurant operations demonstrates one potential path for distressed restaurant chains seeking to restructure outside of liquidation scenarios.
The plan's emphasis on divesting company-owned locations while maintaining the franchise system reflects broader industry trends toward asset-light operating models that reduce fixed costs while preserving brand presence and royalty income streams.
Legal Framework and Confirmation Standards
In its memorandum, Hooters argues that the plan satisfies all requirements under Section 1129 of the Bankruptcy Code for confirmation, including the "best interests of creditors" test, feasibility standards, and various technical requirements. The company notes that even classes deemed to reject the plan can be bound under the Code's "cramdown" provisions since no junior stakeholders receive value while senior classes remain unpaid.
The plan includes carefully structured release and exculpation provisions that protect various parties who participated in the restructuring negotiations. These releases require affirmative consent from creditors and other stakeholders, with 74 parties having opted into the third-party release provisions as of the voting deadline.
Ropes & Gray LLP serves as lead counsel for the debtors, with Foley & Lardner LLP acting as local Texas counsel. The case is being heard by Judge Stephen W. Ellison in the Dallas division of the Northern District of Texas bankruptcy court.
Timeline and Next Steps
The combined hearing on disclosure statement approval and plan confirmation was scheduled for August 16, 2025, with the company seeking prompt court approval to implement the restructuring transactions. If confirmed, the plan would become effective following satisfaction of various closing conditions and regulatory approvals.
The company projects that confirmation will enable it to emerge from bankruptcy with sufficient liquidity and a sustainable capital structure while avoiding the liquidation that would likely result in significant job losses and asset disposition at below-market values.
For Hooters' approximately 305 restaurant locations worldwide and thousands of employees, plan confirmation would mark the beginning of a new chapter for the brand that became synonymous with casual dining and sports entertainment over its four-decade history.
This article was prepared using Stretto Conductor, our new AI-powered assistant that's here to help. Stretto Conductor was able to create this summary of a 70 page court filing in less than a minute. Always review the underlying docket filings for accurate information. The information and responses generated by Stretto Conductor may contain errors or inaccuracies and should not be relied upon as a substitute for professional or legal advice.