Hooters is famous for wearing waitresses in slingwings and beer-fitting t-shirts, but they can increase their stomachs.
The casual dining chain is preparing to file for potential bankruptcy as it plans to work with creditors to restructure operations. Bloomberg News.
The company is involved with law firm Rope & Gray to help with the process, an individual familiar with the discussion told the outlet.
No final decision has been made to seek Chapter 11 protection, but sources say the submission could be made within the next two months.
With around 300 locations across the country, Hooters faces an increase in financial burden as traffic drops in kitsch restaurants, with several front posts closing.
The Atlanta-based company works with its turnaround consultants at its accordion partners to tackle its financial difficulties, particularly its debt burden.
Several creditors are seeking guidance from investment bank Houlihan Lokey, according to Bloomberg.
This post is being asked for comment from Hooters, Accordion Partners, Rope & Gray and Hoolihan Lokie.
The company previously raised about $300 million in 2021 through asset-backed bonds. This is a financial structure that allows companies to use franchise fees and other assets as collateral.
This form of structured debt, known as all-business securitization, is commonly used by restaurant chains, fitness centres and other franchise-rich companies.
The restaurant industry has seen similar financial distress among other major brands.
TGI recently had to give in to management of some assets after failing to meet its obligations. Red Lobster filed for bankruptcy in May.
Hooters' struggle reflects the broader challenges faced by casual dining establishments, particularly as economic conditions change and consumer preferences evolve.
Since being acquired by Nordbay Capital and Trialtisan Capital Advisor in 2019, Hooters has been navigating ongoing market pressure.
The company recently closed several locations that appear to be underperforming, citing unfavourable market conditions. Despite these closures, Hooters is keen to expand as they have plans to open new restaurants both domestically and internationally.
Financial analysts have noted that Hooters' bond performance has been declining in recent months.
The Kroll Bond Rating Agency downgraded our securitized obligations due to a decrease in revenue that affects our ability to meet our repayment obligations.
Similar asset-backed liability structures are used by other companies facing financial burdens, with some companies choosing to restructure or refinance to stabilize their operations.
Kiosk operator Coinstar restructured its asset-backed liabilities of around $1 billion after facing liquidity issues, while marine service provider Centerline Logistics refinanced $400 million in similar securities last year.
As Hooters overcomes financial challenges, industry experts expect to negotiate transactions with creditors to restructure obligations, potentially coming out of bankruptcy.
The coming months will be important in determining whether the company can stabilize its business and continue its long-standing presence in the restaurant industry, experts said.
