FAT Brands Inc., the parent company of Fatburger and Johnny Rockets, along with its affiliates, filed for Chapter 11 bankruptcy protection in Texas on Monday, weighed down by $1.45 billion in funded debt. The filing comes as the restaurant operator struggles with unsustainable debt and dwindling liquidity, despite most of its chains remaining profitable.

Mounting Debt and Pressures

Chief Restructuring Officer John C. DiDonato revealed in a first-day declaration that the company has exhausted all avenues to fund operations. “The debtors have exhausted their options for funding the continued operations of the business,” he said. Inflation and costly litigation added pressure, leaving FAT Brands behind on debt service payments.

The California-based firm owns or franchises 18 restaurant chains, including Fazoli's, Twin Peaks, Hot Dog on a Stick, Buffalo’s Express, Hurricane Grill & Wings, and Ponderosa Steakhouse, operating a combined 2,200 locations nationwide.

Debt Structure and Liquidity Challenges

FAT Brands’ financial woes stem largely from $1.4 billion in fixed-rate securitization notes issued through five special purpose financing vehicles. While the company had previously bridged liquidity gaps through equity raises and selling extra notes, the current market—particularly for restaurant stocks—has made these options untenable. DiDonato cited poor market conditions for FAT Brands and Twin Hospitality shares as a key obstacle.

Restructuring and Mediation Efforts

Currently, the company is seeking to use cash collateral without debtor-in-possession financing. Alongside its first-day motions, FAT Brands filed for mediation with noteholders to negotiate potential DIP financing and stabilize operations during restructuring.

The company is represented in the proceedings by Timothy A. Davidson II of Hunton Andrews Kurth LLP.