Fat Brands has refused to hand over shares in Twin Peaks, according to a lawsuit. | Photo: Shutterstock.
Fat Brands’ largest bondholder is asking a court to demand the company hand over shares in the casual-dining chain Twin Peaks as collateral for the fast-food chain operator’s unpaid debt.
352 Capital, Fat Brands’ largest bondholder, sued the company and one of its legal subsidiaries in a New York court last week. The lawsuit argues that the owner of Fazoli’s and Round Table Pizza did not deliver Class B shares of Twin Peaks to UMB Bank, the trustee overseeing Fat Brands’ whole business securitization financing.
Class B shares are a distinct class of stock that typically hold more voting power than traditional shares. A single share of Twin Peaks Hospitality Class B stock is equal to 50 votes, compared with one vote for a single Class A share.
The lawsuit adds a new wrinkle in the ongoing saga of Fat Brands, one that appears to be over control of the company’s fastest-growing and most successful restaurant chain in Twin Peaks.
UMB in November demanded full payment on the company’s bonds, which are held under five different subsidiaries, after the company missed a quarterly payment last year. Fat Brands owes $1.4 billion through those various subsidiaries. Fat Brands missed the payment after failing to deposit sufficient funds with UMB to pay the bondholders.
(Check out this deep dive into Fat Brands’ financial challenges.)
Andy Wiederhorn, the CEO of Fat Brands, said earlier this month that the company is renegotiating its debt and that the process is “painful and slow.”
“We’re trying to resolve it out of court,” he said at the ICR Conference. “There are some benefits to resolving it in court.”
Fat Brands spun off Twin Peaks last year, but it remains the controlling shareholder, with about 95% of the shares. It spun off the chain at least in part to unload at least part of its debt burden with the new company. Twin Peaks stock is down 98% since that spinoff.
The shares in Twin Peaks were then used to guarantee bonds owed by one of those five subsidiaries set up to borrow the funds. That subsidiary, FB Resid Holdings, owes about $169 million in principal and interest.
Early last year, Fat Brands exchanged its Class A shares in Twin Peaks parent Twin Hospitality Group for Class B shares. 352 says that Fat Brands failed to deliver those Class B shares as collateral on the bonds.
Last month, UMB sent a letter to Fat Brands demanding that it hand over those Class B shares to an intermediary as collateral. Fat Brands responded that it would not do so and then did not respond to later demands for the collateral, according to the lawsuit.
The lawsuit says that 352 demanded UMB take several steps in the aftermath of Fat Brands’ early-November payment default, including the demand for full payment and preserve the collateral for the bonds.
Fat Brands has not yet deposited funds with UMB to send to bondholders, according to the lawsuit. And UMB has not yet taken action to secure the collateral or get full payment on the bonds.
A spokesperson for Fat Brands did not respond to a request for comment.
Fat Brands’ various restaurant chains have struggled over the past two years, with combined same-store sales down each of the past eight quarters. Same-store sales have declined each of the past four quarters at Twin Peaks.
Fat Brands has struggled with liquidity issues, once missing a payment to a marketing vendor last year, leaving Round Table Pizza without advertising for several months. It has taken out risky, high-interest merchant cash advances in at least three instances using its Smokey Bones brand. Franchisees also accuse the company of not sending them promised rebate checks from their beverage vendor.
Yet three top Fat Brands executives, two of whom are Wiederhorn’s sons, received large pay increases and retention bonuses to remain with the company through June, pending a potential bankruptcy filing.
352 Capital’s relationship with Fat Brands has been a controversial one. The fund’s former portfolio manager in 2024 was named head of debt capital markets for Fat Brands only to quit two weeks later after he was accused of fraud related to his use of the fund.
UPDATE: The headline of this story was changed after Fat Brands said that 352 Capital was not the company’s largest bondholder.
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