Hooters of America, LLC is asking a Texas bankruptcy court to approve a $6 million break-up fee that would compensate potential buyers if the iconic restaurant chain ultimately accepts a competing offer for more than 100 of its locations.
The emergency motion, filed June 20, 2025, in the U.S. Bankruptcy Court for the Northern District of Texas in Dallas, seeks approval for the fee to be paid to Hooter's Inc. and Hoot Owl Restaurants, L.L.C., collectively known as the "Buyer Group." The payment would only be triggered if Hooters enters into an alternative transaction that requires terminating its current sale agreements.
Hooters and 29 affiliated companies filed for Chapter 11 bankruptcy protection on March 31, 2025, as part of a broader restructuring effort. The company, founded in 1983 and known for its chicken wings and sports-bar atmosphere, operates 151 company-owned locations and 154 franchised restaurants across 17 countries.
Competing Offers Drive Break-Up Fee Request
The break-up fee stems from asset purchase agreements signed June 17, 2025, under which the Buyer Group would acquire 103 Debtor-owned restaurant locations. However, the debtors have already received two competing transaction proposals that could potentially derail the planned sale.
According to court documents, the "NextGen Proposal" offered substantially the same terms as the Buyer Group arrangements plus a $15 million upfront cash payment. Meanwhile, the "American Pub Proposal" provided a total value of approximately $110.635 million.
"The Break-Up Fee is reasonable, necessary, and just in light of the Buyer Group's substantial time and expense spent conducting diligence and research and submitting a public bid for certain of the Debtors' assets," the motion states.
Financial Structure and Justification
The $6 million break-up fee represents approximately 1.7% of the total obligations involved in the restructuring, which includes nearly $320 million in prepetition debt and a $40 million debtor-in-possession facility. Hooters argues this percentage aligns with break-up fees commonly approved in similar bankruptcy cases in the Northern District of Texas.
The Buyer Group has engaged five law firms and an investment banker in connection with the proposed arrangements and has incurred nearly $2 million in legal fees and expenses alone, according to the filing.
"Knowing that its efforts could be for nothing if the Debtors accept an alternative bid, the Buyer Group was unwilling to enter into the RSA or APAs without the Break-Up Fee," the motion explains.
Strategic Restructuring Framework
The break-up fee is part of a broader Restructuring Support Agreement that would allow Hooters to convert its existing debt obligations into notes and equity for secured creditors in the company's go-forward business. The arrangement aims to streamline Hooters' business model and organizational structure while preserving jobs and maintaining relationships with vendors and landlords.
The debtors emphasize that the break-up fee would only be paid from proceeds of any alternative transaction, after payment of estate professional fees and the DIP facility, and would not impact unsecured creditor recoveries.
Court Proceedings and Timeline
Hooters has requested emergency consideration of the motion, seeking approval no later than 9:30 a.m. Central Time on June 25, 2025. The tight timeline reflects provisions in the asset purchase agreements that allow the Buyer Group to terminate if the break-up fee is not approved within 21 days of execution.
The case is being handled in the Northern District of Texas bankruptcy court under Case No. 25-80078 (SWE), with Judge Everett presiding. An official committee of unsecured creditors was appointed on April 15, 2025.
The debtors are represented by Foley & Lardner LLP as local counsel and Ropes & Gray LLP as co-counsel. The motion indicates that a settlement in principle has been reached with the creditors' committee that provides for a litigation trust funded with cash for unsecured creditors' benefit.
The break-up fee arrangement includes standard protections and would be treated as an administrative expense under bankruptcy law if triggered. The court retains jurisdiction over all matters related to the implementation and enforcement of any approval order.
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 20 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.