TGI Friday’s Inc. is in talks with potential buyers following its recent bankruptcy filing, the company’s attorney revealed on Monday. The popular restaurant chain, known for its casual dining experience, has faced significant financial strain, partly due to losing control over critical assets that had backed $375 million in bonds issued in 2017, as per a Bloomberg report
The company, which filed for bankruptcy in Texas on Saturday, confirmed interest from multiple parties looking to acquire some or all of its assets. However, the identities of these potential buyers were not disclosed during the initial court hearing. Company lawyer Chris Dickerson mentioned that TGI Friday’s is “pretty far down the road” with one particular bidder. The restaurant chain hopes this party will agree to act as a “stalking horse” bidder, a strategic move that would set a minimum purchase price for TGI Friday’s assets, paving the way for other potential offers in a Chapter 11 auction.
In court discussions on Monday, the focus shifted to TGI Friday’s 2017 bond sale, which was structured as a “whole-business securitization.” This financing method involved backing the bonds with the chain’s brand, licensing agreements, future franchise deals, and royalty revenue. However, in September, TGI Friday’s lost control of these key revenue streams, which are now managed by FTI Consulting Inc. The loss of access to restaurant royalty payments has hit TGI Friday’s income significantly, the company said in recent court filings.
The method of whole-business securitization, which has grown popular among franchise chains for its cost-effective funding, has rarely been tested in bankruptcy cases. Under this structure, special corporate entities tied to the bond sale are set up to secure these assets. However, these entities are not included in TGI Friday’s Chapter 11 filing.
During the hearing, Alexander Woolverton, a lawyer for FTI, contested some points in TGI Friday’s bankruptcy filings, asserting that the securitization entities “don’t endorse the narrative” laid out by the restaurant chain. Woolverton claimed TGI Friday’s filings were incomplete and hinted that additional details could emerge in upcoming proceedings.
Court’s approval
TGI Friday’s also gained court approval to continue paying wages and meet other routine expenses as it reorganizes under Chapter 11 protection. Despite these operational allowances, the chain has already closed some locations and reported a 15% drop in U.S. sales over the past year. This decline is partly attributed to rising costs and shifts in consumer behavior toward faster, limited-service dining options.
The case is filed as TGI Friday’s Inc., number 24-80069, in the U.S. Bankruptcy Court for the Northern District of Texas.